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%

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Definitions:

Psychographic

A classification criterion based on people's lifestyles, activities, interests, opinions, and values to understand consumer behavior better.

Behavioral

Relating to the actions and reactions of individuals or groups in response to stimuli.

Acquisition Costs

The total cost associated with acquiring a new asset, customer, or property, including all legal, advisory, and administrative expenses.

Customer Retention

The activities and actions companies take to reduce the number of customers leaving or switching to a competitor.