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Singular Construction is evaluating whether to build a new distribution facility. The proposed investment will cost...

Singular Construction is evaluating whether to build a new distribution facility. The proposed investment will cost Singular $1 million to construct and provide cash savings of $200,000 per year over the next 10 years.  What is the maximum risk-free rate under which Singular is willing to make this investment? Justify your answer

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Answer #1

The maximum risk free rate under which singular is willing to make this investment would be IRR of this project.

It is the rate at which NPV of the project becomes Zero. Thus, mazimum rate at which he is willing to make investment would be its IRR i.e. 15.10%

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