You are considering raising dollars to invest in a project that requires an investment today of $1,000;
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Question:
You are considering raising dollars to invest in a project that requires an investment today of $1,000; it is a one-period project with an IRR of 14%.You will raise the dollars using a 20% debt to total assets capital structure.Debt dollars will cost 6% before tax, and equity dollars will cost 15%.Your tax rate is 40%.Is the project acceptable?Support this answer.Accepting the project would result in what rate of return for the equity investors?
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