Tomm is considering a business venture requiring an initial investment of $10000 and a further investment of
Question:
Tomm is considering a business venture requiring an initial investment of $10000 and a further investment of $3000 after one year. The venture is expected to produce an income of $550 in two years' time, $1100 in three years' time, $1650 in four years' time and so on, the final income $4400 in nine years' time.
a) Find the internal rate of return (IRR) for this project.
b) Tom has no spare cash, but may borrow money at any time at the fixed rate of 5% per annum, with all loan being repayable in whole or in part at any time at the borrower's discretion. Malcom is considering borrowing to finance the venture described above. Explain if he should undertake the venture and, if so, calculate his profit be in nine years' time at the completion of the venture?
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts