Question
John borrows $100,000 from the bank at 8% interest and uses the capital to start an internet marketing company. Based on his forecast of future
John borrows $100,000 from the bank at 8% interest and uses the capital to start an internet marketing company. Based on his forecast of future profits over five years, he calculates his internal rate of return at 10%. Inflation is also running at 2% annually. Is this a good investment?
Yes, John is earning a higher Internal Rate of Return that the loan. | ||
Yes, John's Internal Rate of Return with Inflation is returning 12%, and his loan is 8%. | ||
No, after inflation John is just breaking even and therefore not earning a profit. | ||
There's not enough information to answer this question. |
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