Your brother wants to borrow $9,750 from you. He has offered to pay you back $13,000 in a year. If the cost of capital of this investment opportunity is 12%, 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.

If the cost of capital of this investment opportunity is

12%, what is its NPV?

The NPV of the investment is $

enter your response here _________

. (Round to the nearest cent.)

Should you undertake the investment opportunity?

Since the NPV is

(positive or negative)

, you should

(take, not 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.)