You have estimated the following cash flows on a project: Year Cash Flow to Equity ($) 0

Question:

You have estimated the following cash flows on a project:

Year Cash Flow to Equity ($)

0 …………………………….. −5,000,000

1 …………………………….. 4,000,000

2 …………………………….. 4,000,000

3 …………………………….. −3,000,000

Plot the NPV profile for this project. What is the IRR? If the cost of equity is 16%, would you accept this project?

Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...