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IRR, investment life, and cash inflows Oak Enterprises accepts projects earning more than the firm's 13% cost of capital. Oak is currently considering a 10-year project that provides annual cash inflows of $15,000 and requires an initial investment of $104,100. a. Determine the IRR of this project. Is it acceptable? b. Assuming that the cash inflows continue to be $15,000 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 13 %)? c. With the given life, an initial investment of $104,100, and cost of capital of 13%, 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 13% cost of capital. Oak is currently considering a 10-year project that provides annual cash inflows of $15,000 and requires an initial investment of $104,100. a. Determine the IRR of this project. Is it acceptable? b. Assuming that the cash inflows continue to be $15,000 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 13 %)? c. With the given life, an initial investment of $104,100, and cost of capital of 13%, 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.)

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 8TP: Fenton, Inc., has established a new strategic plan that calls for new capital investment. The...
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IRR, investment life, and cash inflows Oak Enterprises accepts projects earning more than the firm's 13% cost of capital. Oak is currently considering a 10-year project that provides annual cash inflows of $15,000 and requires an initial investment of $104,100. a. Determine the IRR of this project. Is it acceptable? b. Assuming that the cash inflows continue to be $15,000 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 13 %)? c. With the given life, an initial investment of $104,100, and cost of capital of 13%, 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 projects IRR is%. (Round to two decimal places.)
Transcribed Image Text:IRR, investment life, and cash inflows Oak Enterprises accepts projects earning more than the firm's 13% cost of capital. Oak is currently considering a 10-year project that provides annual cash inflows of $15,000 and requires an initial investment of $104,100. a. Determine the IRR of this project. Is it acceptable? b. Assuming that the cash inflows continue to be $15,000 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 13 %)? c. With the given life, an initial investment of $104,100, and cost of capital of 13%, 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 projects IRR is%. (Round to two decimal places.)
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