IRR, investment life, and cash inflows Oak Enterprises accepts projects earning more than the firm's 14% cost of capital. Oak is currently considering a 10-year project that provides annual cash inflows of $30,000 and requires an initial investment of $203,200. a. Determine the IRR of this project. Is it acceptable? b. Assuming that the cash inflows continue to be $30,000 per year, how many additional years would the flows have to continue to make the project acceptable (that is, to make it have an IRR of 14%)? c. With the given life, an initial investment of $203,200, and cost of capital of 14%, what is the minimum annual cash inflow the investment would have to provide in order for this project to make sense for Oak's shareholders? a. The project's IRR is %. (Round to two decimal places.)
IRR, investment life, and cash inflows Oak Enterprises accepts projects earning more than the firm's 14% cost of capital. Oak is currently considering a 10-year project that provides annual cash inflows of $30,000 and requires an initial investment of $203,200. a. Determine the IRR of this project. Is it acceptable? b. Assuming that the cash inflows continue to be $30,000 per year, how many additional years would the flows have to continue to make the project acceptable (that is, to make it have an IRR of 14%)? c. With the given life, an initial investment of $203,200, and cost of capital of 14%, what is the minimum annual cash inflow the investment would have to provide in order for this project to make sense for Oak's shareholders? a. The project's IRR is %. (Round to two decimal places.)
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 21P
Question
![IRR, investment life, and cash inflows Oak Enterprises accepts projects earning more than the firm's 14% cost of
capital. Oak is currently considering a 10-year project that provides annual cash inflows of $30,000 and requires an
initial investment of $203,200.
a. Determine the IRR of this project. Is it acceptable?
b. Assuming that the cash inflows continue to be $30,000 per year, how many additional years would the flows have
to continue to make the project acceptable (that is, to make it have an IRR of 14%)?
c. With the given life, an initial investment of $203,200, and cost of capital of 14%, what is the minimum annual cash
inflow the investment would have to provide in order for this project to make sense for Oak's shareholders?
a. The project's IRR is %. (Round to two decimal places.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F29da6ba4-21db-4525-8cbd-db9c85a87736%2Fb80df2bc-d93f-4382-ad31-8353f97d9e78%2Fio227c2_processed.jpeg&w=3840&q=75)
Transcribed Image Text:IRR, investment life, and cash inflows Oak Enterprises accepts projects earning more than the firm's 14% cost of
capital. Oak is currently considering a 10-year project that provides annual cash inflows of $30,000 and requires an
initial investment of $203,200.
a. Determine the IRR of this project. Is it acceptable?
b. Assuming that the cash inflows continue to be $30,000 per year, how many additional years would the flows have
to continue to make the project acceptable (that is, to make it have an IRR of 14%)?
c. With the given life, an initial investment of $203,200, and cost of capital of 14%, what is the minimum annual cash
inflow the investment would have to provide in order for this project to make sense for Oak's shareholders?
a. The project's IRR is %. (Round to two decimal places.)
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