Question: You work for BurgerInc. , and evaluating a project in the firms beverage division. Should you accept the project if the project's IRR (on total

You work for BurgerInc. , and evaluating a project in the firms beverage division. Should you accept the project if the project's IRR (on total investment FCFa) is 13%.

Justify your answer if you estimated the following:

-BurgerInc. has two divisions (restaurants & beverage) of approximately equal size (by market value).

-The risk free rate is 4%, equity market-risk premium is 6%

-BurgerInc. can borrow at 5% (an all-in interest rate)

-BurgerInc.'s equity beta is 1.4 and its past/current leverage is the same as its target/desired future leverage D/V = 20%

-MCDinc. is an all-equity "pure play" fast food firm with (comp. to the restaurant division) and its unlevered beta is .70

-Both firms face a 30% marginal corporate tax rate.

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