Begley Enterprises is considering investing in a project estimated to produce annual cash flows of approximately $10,000 over the next ten years. The initial cost of the investment is $53,280. Assume that the cash flows will be received at the end of each of the ten years.
a. Compute the implicit interest rate on the investment.
b. If Begley has to borrow the $53,280 from a bank at an annual interest rate of 8 percent, should it pursue this project? Why or why not?