Q1

Q2

IRR, investment life, and cash inflows Oak Enterprises accepts projects earning more than the firm's 11% cost of capital. Oak is currently considering a 10-year project that provides annual cash inflows of $50,000 and requires an initial investment of $340,600 a. Determine the IRR of this project. Is it acceptable? b. Assuming that the cash inflows continue to be $50,000 per year, how many additional years would the flows have to continue to make the project acceptable (that is, to make it have an IRR of 11%)? c. With the given life, an initial investment of $340,600, and cost of capital of 11%, what is the minimum annual cash inflow the investment would have to provide in order for this project to make sense for Oak's shareholders? NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $47,760, and the project will yield cash inflows of $7,000 per year for 11 years. The firm has a cost of capital of 8% a. Determine the net present value (NPV) for the project. b. Determine the internal rate of return (IRR) for the project. c. Would you recommend that the firm accept or reject the project