A project requires an initial investment of $1.2 million. It expects to generate a perpetual cash flow. The first year cash flow is expected at
A project requires an initial investment of $1.2 million. It expects to generate a perpetual cash flow. The first year cash flow is expected at $100,000. The cash flows are then expected to grow at 1.25% forever. The appropriate cost of capital for this project is 11%. What is the project's IRR and should it be accepted based on the IRR rule?
Group of answer choices
IRR is 9.6%; project should not be accepted
IRR is 9.6%; project should be accepted
IRR is 11.6%; project should not be accepted
IRR is 11.6%; project should be accepted
IRR is 10.6%; project should be accepted
IRR is 10.6%; project should not be accepted
Step by Step Solution
There are 3 Steps involved in it
Step: 1
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