Perez Group has the opportunity to enter into a joint venture giving it a 49 percent ownership
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Perez Group has the opportunity to enter into a joint venture giving it a 49 percent ownership with local investors in an emerging country. The firm would be required to invest the entire $3,000,000 initial outlay needed for the venture and would receive 80 percent of the expected $900,000 yearly net cash flows for 10 years. At the end of 10 years, ownership will be turned over to the local investors. Cost of capital is 10 percent. Because of the inherent risk of overseas investments, Perez will accept such projects only if the projected IRR is more than 20 percent.
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Should Perez invest in the project?
Cost Of CapitalCost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
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Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins
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