InterCont is a construction company that plans on purchasing new equipment this year for a new project. The project is expected to return $700,000 per year for the next 5 years. The equipment needed will cost $5,000,000. In order to purchase this equipment, InterCont must acquire the necessary funds from several sources. The following list shows the proportion of funds expected from each source, and the rate of interest (or similar cost) that will be required for each source:
InterCont is a very conservative company, and requires a "buffer margin" of 5 percentage points for any large investment project.
Does the proposed project meet the company's required rate of return?

Question

InterCont is a construction company that plans on purchasing new equipment this year for a new project. The project is expected to return $700,000 per year for the next 5 years. The equipment needed will cost $5,000,000. In order to purchase this equipment, InterCont must acquire the necessary funds from several sources. The following list shows the proportion of funds expected from each source, and the rate of interest (or similar cost) that will be required for each source:
  InterCont is a very conservative company, and requires a "buffer margin" of 5 percentage points for any large investment project.
Does the proposed project meet the company's required rate of return?

Quizplus · Accepted Answer

The Answer of InterCont is a construction company that plans on purchasing new equipment this year for a new project. The project is expected to return $700,000 per year for the next 5 years. The equipment needed will cost $5,000,000. In order to purchase this equipment, InterCont must acquire the necessary funds from several sources. The following list shows the proportion of funds expected from each source, and the rate of interest (or similar cost) that will be required for each source:
  InterCont is a very conservative company, and requires a "buffer margin" of 5 percentage points for any large investment project.
Does the proposed project meet the company's required rate of return?

InterCont Is a Construction Company That Plans on Purchasing New