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Inc is undertaking a $10,000,000 project that will generate $2.5M of yearly after-tax cash flows. Assume the project's IRR is 15%. If the firm finances
Inc is undertaking a $10,000,000 project that will generate $2.5M of yearly after-tax cash flows. Assume the project's IRR is 15%. If the firm finances the project with only equity, the cost of capital will be 20% and the NPV will be negative. However, if UNT finances the project with a mix of debt and equity, the cost of capital will be 10% and the NPV will be positive. This change to the NPV of the project has what effect on the project's IRR?
Multiple Choice
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No effect
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Increases the IRR
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not enough information to answer.
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Decreases the IRR
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