Question
The Expresso Roast Corporation (ERC) is considering expanding its product lines by purchasing the Quick-Roast Coffee Company.. The companys founder is obscenely wealthy and will
The Expresso Roast Corporation (ERC) is considering expanding its product lines by purchasing the Quick-Roast Coffee Company.. The companys founder is obscenely wealthy and will operate these lines for only one year before retiring and will therefore use only a one-year planning horizon. Quick-Roast Coffee has a cost of $75,000 and is expected to produce cash benefits of $80,000. A major government study may come out later on this year declaring coffee drinking a major health risk, so this is a risky investment and ERCs CFO has recommended a risk premium of 15%. What is the IRR of this investment?
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