Question
You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the project are
You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the project are as follows: |
Years | Cash Flow | ||
0 | 100 | ||
110 | + | 19 | |
On the basis of the behavior of the firms stock, you believe that the beta of the firm is 1.46. Assume that the rate of return available on risk-free investments is 4% and that the expected rate of return on the market portfolio is 13%. |
What is the project IRR? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) |
IRR | % |
What is the cost of capital for the project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) |
Cost of capital | % |
Does the accept-reject decision using IRR agree with the decision using NPV? | ||||
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