Question

A company is considering an investment that requires an immediate investment of $550,000 and an additional...

A company is considering an investment that requires an immediate investment of $550,000 and an additional investment of $125,000 in year 3. The investment will generate annual profits of $180,000 for five years, starting from year 2.

a. Calculate the IRR for this investment.

%

Round to two decimal places

b. If the cost of capital is 8%, should the company undertake the investment?

(click to select)

Yes

No

Business   Accounting   
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Homework Answers

Answer #1

hence IRR = 8.79%

NPV AT 8% = 16222.64

SINCE THE NPV OS POSTIVE , HENCE YES WE UNTERTAKE THE PROJECT.

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