Sodu can expand a succesful manufacturing line for an immediate investment of $91 million. The company anticipates that the project will generate a cash flow of $152 million in 8 years (and only in that one year). The company considers the required rate of return of the project to be 12.60%
This is a two-part question. YOU MUST GET BOTH PARTS CORRECT TO EARN 5 POINTS.
PART 1. Calculate the project's internal rate of return: %
PART 2. Given your estimate of the IRR, should Sodu accept or reject the project? Type the word "yes" if you believe they should go ahead with the project or the word "no" if you believe they should not go ahead with the project.