You are considering investing in a start up company. The founder asked you for

$230,000

today and you expect to get

$1,070,000

in

10

years. Given the riskiness of the investment opportunity, your cost of capital is

27%.

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.

Question content area bottom

Part 1

What is the NPV of the investment opportunity?

The NPV of the investment is

$enter your response here.

(Round to the nearest dollar.)

Part 2

Should you undertake the investment opportunity?

Since the NPV is

negative

positive

, you should

not take

take

the deal! (Select from the drop-down menus.)

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

The IRR is

enter your response here%.

(Round to two decimal places.)

Part 4

The maximum deviation allowable in the cost of capital is

enter your response here%.

(Round to two decimal places.)