Mike can invest the same amount of funds in the market and, Financial Management

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Mike can invest the same amount of funds in the market and

Mike wants to start his own business. The initial investment required is $75,000 and the project's beta is 1.1. The estimated annual net cash flows are given below:

Year 1: 15,000

Year 2: 25,000

Year 3: 35,000

Year 4: 40,000

Mike can invest the same amount of funds in the market and expect to earn 12%, or he can purchase government securities and earn 6%. Assuming that Mike's after-tax cost of debt is 7% and his target debt to equity ratio is 0.4, calculate NPV and IRR for the project.

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