Your client Anna is considering making a 5-year investment in her friends bakery business. She...
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Accounting
Your client Anna is considering making a 5-year investment in her friends bakery business. She would have to initially invest $50,000 into the business. She can expect the following cash flows from the business:
Year 1 $9,000
Year 2 $4,000
Year 3 Nothing
Year 4 $7,000
Year 5 $6,000
After the 5th year, along with the cash flow listed above, her friend will return $45,000 of the initial $50,000 investment. What is Annas IRR on this investment and, if her required rate of return is 10%, would you recommend Anna make this investment?
a. 11.05%, Yes
b. -11.05%, No
c. 8.85%, Yes
d. 8.85%, No
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