$120,000 initial investment, cash flows of $30,000 per year for four years
Your cost of capital is 7.0% if your capital spending is less than $700,000. It goes up to 8.0% if you exceed that $700,000 threshold.
Your company uses the Risk-Adjusted Discount Rate method to account for differences in project risk; the risk premium is 3%.
A. What is the NPV and IRR for the projects using the appropriate cost of capital? B. Evaluate risk for the project