BMW is evalasting a ew 200 series iosmd the below details. BMW as o build a factory a piece of land AMw te 5 years ago for 565 situation she lanel i and bnald the new factory insteat cash foe the inicial investment is already cash low boem selling t 250, 850 respectively. T to gencrate above that the risk free rate. series. The the projest and a factory tat cot $760 malion The is valued at $620 million nition that also includes an eld boailding Ad its cuness Removing the bailding and clearing the land with co 516 million. The invested sn riskless governmem securities "t 4% umaal ra. The he new medel is expected to be over the nest S years (in miltions) 25o, 200, 225, ypically, such projects generated 15% return bui the company expects ous proms rate Fther, the aanmotne industry enjoy.. low risk premium of 9% over e Pinaly, the new model will eat up from the sales of the other models, especially the 300 e anthcipated effect is a roduction of about $20 million in annual cash flows for the coming 5 years K. What is the cost of the initial investment (Oin milion? $1,396.00 $1,516.00 51,568.00o $1,716.00 $1,591.00 9 What is the IRR of the project and should you take in? (Assume initial cost $1,200 million) a The annual IRR is 9.59% and the investment does create wealth for the company b. The annual IRR is 9.59% and the investment does not create weath for the company. c. The annual IRR is1 2.35% and the investment does create wealth for the company d. The annual IRR is 12.35% and the investment does not create wealth for the company e. None of the above. 10. Agency costs can be thought of as the loss in the value of a firm resulting from the ) reduced effort III) empire building V) distributing dividends following actions by managers: 1D perks or private benefits I) entrenching investments A. I, II and III only B. I, II and IV only D. I, II, III, and V only E. I, II, IV, and V only C. I, II, III and IV only