Inc is undertaking a $10,000,000 project that will generate $2.5M of yearly after-tax cash flows. Assume the project's I
Posted: Fri Jul 01, 2022 7:48 am
Inc is undertaking a $10,000,000 project that will generate$2.5M of yearly after-tax cash flows. Assume the project's IRR is15%. If the firm finances the project with only equity, the cost ofcapital will be 20% and the NPV will be negative. However, if UNTfinances the project with a mix of debt and equity, the cost ofcapital will be 10% and the NPV will be positive. This change tothe NPV of the project has what effect on the project's IRR?
Multiple Choice
No effect
Increases the IRR
not enough information to answer.
Decreases the IRR
Multiple Choice
No effect
Increases the IRR
not enough information to answer.
Decreases the IRR