Question
44.You have analyzed an investment opportunity that will cost $50,000 to undertake. By the end of year 5, the investment will have paid for itself.
44.You have analyzed an investment opportunity that will cost $50,000 to undertake. By the end of year 5, the investment will have paid for itself. After that the investment will continue to generate cashflows. The risk of the project is about 10%. If the firms after-tax cost of debt is 3% and its cost of equity is 12%, should the project be accepted?
Select one:a. Yes because the WACC is less than the risk of the project.b. No because cost of financing is higher than the projects return.c. Yes because the investment is low risk and will pay for itself after only five years.d. No because the risk of the project is higher than the cost of debt.e. Without further information it is impossible to answer.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started