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Posted on May 19, 2024

You are considering investing in a start up company. The founder asked you for $280,000 today and you expect to get $970,000 in 8 years.

You are considering investing in a start up company. The founder asked you for $280,000 today and you expect to get $970,000 in 8 years. Given the riskiness of the investment opportunity, your cost of capital is 22%.

What is the NPV of the investment opportunity?

Should you undertake the investment opportunity?

Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.

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