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Your brother wants to borrow $10,000 from you. He has offered to pay you back $12,000 in a year. If the cost of capital of

Your brother wants to borrow

$10,000

from you. He has offered to pay you back

$12,000

in a year. If the cost of capital of this investment opportunity is

10%,

what is its NPV? 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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