Answer:
What does the IRR rule say about whether you should accept this opportunity?
The IRR rule basically states that if the project's internal rate of return (IRR) is higher than the cost of capital (discount rate or WACC), then the project should be accepted. In this case, we are not given the company's WACC or any discount rate we can use, therefore there is nothing to compare the project's IRR against.
Based on prior experience, this project's IRR will not be very high and if we consider the cost of keeping the site clean forever, I really doubt that the project is profitable. If you calculate the project's IRR without including the perpetual cleaning cost, IRR = 11%.
If we assume any of the 3 WACCs I used as an example below, the project's IRR including cleaning costs:
- if WACC = 12%, then IRR = 9.26% REJECTED
- if WACC = 10%, then IRR = 8.98% REJECTED
- if WACC = 9%, then IRR = 8.79% REJECTED
- if WACC = 8%, then IRR = 8.54% ACCEPTED
In order for this project to be profitable, the WACC would need to be very low (around 8% or less).
Explanation:
cost of opening a new mine $120 million
annual cash flow $20 million
expected cleaning costs $2 per year in perpetuity
the cost of keeping the site clean forever = $2 million / discount rate or WACC:
- if WACC = 12%, then perpetual cost = $16.67 million
- if WACC = 10%, then perpetual cost = $20 million
- if WACC = 9%, then perpetual cost = $22.22 million
- if WACC = 8%, then perpetual cost = $25 million
The correct answer is accounts receivable.
While a loan must be repaid, factoring is the selling of accounts receivable to a finance company who then assumes responsibility for collecting the accounts.
<h3>What is factoring? </h3>
- Factoring is concerned to a kind of financial transaction. It is also a type of a debtor finance.
- In factoring a business sells it accounts receivable to another party at a lower cost or at a discount.
- It is usually used in international trade finance.
- It is also known as invoice factoring, accounts receivable factoring, or also as receivable financing.
- In factoring there are three different parties directly involved.
- The whole process highly confidential.
To learn more about accounts visit: brainly.com/question/17373928?
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Basic Answer
a carpenter sells furniture, whereas an automobile manufacturer sells cars.
Bussiness Answer
a carpenter sells style , whereas an automobile manufacturer sells mobility.
