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Clyde has the opportunity to purchase a large building for $750,000 He will need to spend additional $175,000 to renovate and convert to an upscale
Clyde has the opportunity to purchase a large building for $750,000 He will need to spend additional $175,000 to renovate and convert to an upscale dining establishment. He estimates the following after tax cash flows. Year 6 cash flow includes the terminal value of the venture.
The Internal Rate of Return (IRR) of the venture is 15, 6, 10, or 12%?
If Clyde's cost of capital is 8%, Clyde will "accept or reject" the venture?
Year | Cash-flows |
1 | 90,000 |
2 | 100,000 |
3 | 105,000 |
4 | 120,000 |
5 | 126,000 |
6 | 900,000 |
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