Question
The Titanic Shipbuilding Company has a noncancelable contract to build a small cargo vessel. Construction involves a cash outlay of $256,000 at the end of
The Titanic Shipbuilding Company has a noncancelable contract to build a small cargo vessel. Construction involves a cash outlay of $256,000 at the end of each of the next two years. At the end of the third year the company will receive payment of $640,000. The company can speed up construction by working an extra shift. In this case there will be a cash outlay of $560,000 at the end of the first year followed by a cash payment of $640,000 at the end of the second year. Use the IRR rule to calculate the (approximate) range of opportunity costs of capital at which the company should work the extra shift. (Round your answers to 2 decimal places.)
Costs of capital is between ________ % and ________ %. |
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