Question

You are considering an investment in a clothes distributer. The company needs $110,000 today and expects to repay you $121,000 in a year from now. What is the IRR of this investment opportunity? Given the riskiness of the investment opportunity, your cost of capital is 19%. What does the IRR rule say about whether you should invest? • What is the IRR of this investment opportunity? The IRR of this investment opportunity is %. (Round to one decimal place.) Given the riskiness of the investment opportunity, your cost of capital is 19%. What does the IRR rule say about whether you should invest? The IRR rule says that you V. (Select from the drop-down menu.)

Answer 1

IRR is the rate at which NPV = 0

Let it be x

110,000 = 121,000/(1+x)

X = 10%

Hence, IRR = 10%

IRR rule says that the project should be accepted when IRR is higher than cost of capital

Hence, should reject