Should take the project suppose are a building contractor

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Suppose you are a building contractor and have been given an offer to build a house. If you agree to do the project, you will receive $300,000 up front but then will have to bear all construction costs out of pocket. In this arrangement, the only time you receive money is at the start date. All subsequent cash flows are cash outflows: wages workers, payment for supplies, payment to subcontractors, etc.

You have estimated the future cash outflows related to the project but have mislaid the figures. On the other hand, you are sure that the project's internal rate of return is 5% and the relevant discount rate is 15%.

Problem 1: Should you take the project?

A. Yes

B. No

Reference no: EM132969408

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