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Homework answers / question archive / Assume that Leo has a new venture that costs $100,000
Assume that Leo has a new venture that costs $100,000. The company expects to have cash flows of $40,000 per year for the first four years and $50,000 in year 5. There will be no salvage value and the company’s cost of capital is 9.23%.
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If the company in the above problem uses IRR, would you accept or reject the project?
Hint: You accept a project if IRR is greater than the cost of capital.
Question 6 options:
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25%; accept |
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-23%; reject |
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$12%; reject |
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30%; accept |
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