Aiden’s Plumbing Company (APC) is bidding on a City of Winnipeg construction contract. The contract is for a 3-year period. The contract calls for the city to pay APC $6,000,000 at the start of the contract and $2,000,000 at the end of each of the 3 years of the contract. APC estimates that its expenses will be $5,000,000 at the end of each of the 3 years. If APC uses IRR to evaluate its project opportunities, it would only accept this contract if its required return for such projects is a. <12.97800069% b. <23.37519285% c. < 25% d. <33.333333% e. >12.97800069% f. >23.37519285% g. >25% h. >33.333333% Answer is f. Please advise how to figure out this answer and any formulas required.
Aiden’s Plumbing Company (APC) is bidding on a City of Winnipeg construction contract. The contract is for a 3-year period. The contract calls for the city to pay APC $6,000,000 at the start of the contract and $2,000,000 at the end of each of the 3 years of the contract. APC estimates that its expenses will be $5,000,000 at the end of each of the 3 years. If APC uses IRR to evaluate its project opportunities, it would only accept this contract if its required return for such projects is a. <12.97800069% b. <23.37519285% c. < 25% d. <33.333333% e. >12.97800069% f. >23.37519285% g. >25% h. >33.333333% Answer is f. Please advise how to figure out this answer and any formulas required.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Aiden’s Plumbing Company (APC) is bidding on a City of Winnipeg construction contract. The contract is for a 3-year period. The contract calls for the city to pay APC $6,000,000 at the start of the contract and $2,000,000 at the end of each of the 3 years of the contract. APC estimates that its expenses will be $5,000,000 at the end of each of the 3 years. If APC uses IRR to evaluate its project opportunities, it would only accept this contract if its required return for such projects is
a. <12.97800069%
b. <23.37519285%
c. < 25%
d. <33.333333%
e. >12.97800069%
f. >23.37519285%
g. >25%
h. >33.333333%
Answer is f. Please advise how to figure out this answer and any formulas required.
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