A Project Has an IRR of 16% and Is Being

question 161

Multiple Choice

A project has an IRR of 16% and is being considered by a firm with $5 million in debt and $15 million in equity. Assuming the debt costs 12% (after-tax value) , what is the most equity can cost for the project to be acceptable to the firm? (hint: set the IRR equal to WACC)

• A)18.25%
• B)17.83%
• C)17.33%
• D)16.89%

---

Definitions:

Labor Intensive

A term used to describe a process or industry that requires a large amount of manual labor relative to capital investment.

Alternative Technologies

Different or new technologies that provide an alternative way of solving problems or completing tasks, often with the aim of improving efficiency or environmental sustainability.

Marginal Product

The extra output, or increase in production, that results from adding one more unit of a specific input, while other inputs are kept constant.

Total Product

The total quantity of output produced by a firm over a given period of time.