Biogen Inc. is considering a capital expansion project. The initial investment of undertaking this project is $238,200. This expansion project will last for five years. The net operating cash flows from the expansion project at the end of year 1, 2, 3, 4 and 5 are estimated to be $42,350, $47,024, $94,752, $82,512 and $120,456 respectively.

Biogen has a weighted average cost of capital of 28%. _______________________________________________

What is the internal rate of return (IRR) if Biogen undertakes this project? Based on the IRR, shall Biogen undertake this investment project assuming the weighted average cost of capital is the appropriate discount rate for the capital budgeting problems considered. Question 17 options:

IRR=15.53%. Biogen shall not undertake the investment project since IRR

IRR=30.81%. Biogen shall undertake the investment project since IRR>WACC.

IRR=22.47%. Biogen shall not undertake the investment project since IRR

IRR=29.82%. Biogen shall undertake the investment project since IRR>WACC.