Question

Internal rate of return  Peace of​ Mind, Inc.​ (PMI) sells extended warranties for durable consumer goods such as washing machines and refrigerators. When PMI sells an extended​ warranty, it receives cash up front from the​ customer, but later PMI must cover any repair costs that arise. An analyst working for PMI is considering a warranty for a new line of​ big-screen TVs. A consumer who purchases the 2​-year warranty will pay PMI ​$200. On​ average, the repair costs that PMI must cover will average ​$106 for each for the​ warranty's 2 years. If PMI has a cost of capital of 7​%, should it offer this warranty for​ sale? The internal rate of return​ (IRR) for this project is nothing​%. ​ (Round to two decimal​ places.).

Answer 1