Question
Ford Motor Company is considering producing a new extremely limited-edition version of the Mustang. The initial costs associated with retooling a manufacturing plant, redesign, initial
Ford Motor Company is considering producing a new extremely limited-edition version of the Mustang. The initial costs associated with retooling a manufacturing plant, redesign, initial marketing, raw materials and other costs would be $6 million at the present time. The project is expected to generate only one cash flow of $18 million. Given the complexity of the project, the cars will not be ready until 4 years from now. Ford estimates that shareholders will require to earn 19 percent on investments such as this. Part 1. Calculate the internal rate of return on the investment. percent Place your answer in percentage form with at least two decimal places of accuracy and without the percentage sign. For example, if your intended answer is two point seven two percent, then place your answer as 2.72 Part 2. Based upon the IRR decision rule, should the company invest in the Mustang? (Yes or No)
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