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You are considering raising dollars to invest in a project that requires an investment today of $2,000; it is a one-period project with an IRR
You are considering raising dollars to invest in a project that requires an investment today of $2,000; it is a one-period project with an IRR of 18%. You will raise the dollars using a 25% debt to total assets capital structure. Debt dollars will cost 5% before tax, and equity dollars will cost 15%. Your tax rate is 30%.
1. Is the project acceptable? Why or why not this project is acceptable.
2. What rate of return for the equity investors if project is accepted?
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