Starsky is a research company that plans on purchasing new equipment this year for an existing project that has shown promising results. The project is expected to return $195,000 per year for the next 10 years. The equipment needed will cost $2,000,000. In order to purchase this equipment, Starsky 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:
Starsky is a conservative company, and requires a "buffer margin" of 3.5 percentage points for any large investment project. Does the proposed project meet the company's required rate of return?

Question

Starsky is a research company that plans on purchasing new equipment this year for an existing project that has shown promising results. The project is expected to return $195,000 per year for the next 10 years. The equipment needed will cost $2,000,000. In order to purchase this equipment, Starsky 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:
  Starsky is a conservative company, and requires a "buffer margin" of 3.5 percentage points for any large investment project. Does the proposed project meet the company's required rate of return?

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The Answer of Starsky is a research company that plans on purchasing new equipment this year for an existing project that has shown promising results. The project is expected to return $195,000 per year for the next 10 years. The equipment needed will cost $2,000,000. In order to purchase this equipment, Starsky 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:
  Starsky is a conservative company, and requires a "buffer margin" of 3.5 percentage points for any large investment project. Does the proposed project meet the company's required rate of return?

Starsky Is a Research Company That Plans on Purchasing New