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weighted average cost of capital and IRR investments

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Your company's weighted average cost of capital is 11%. You believe the company should make a particular investment, but the IRR of this investment is only 9%.

What arguments might exist in support of your position?

Is it really possible that making an investment with a return below your firm's cost of capital can ever create value?

Explain.

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Solution Summary

The solution discusses if a company should make a particular investment with an IRR of the investment only being 9%.

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As discussed in the previous response, the IRR is the discount rate that makes the NPV of an investment zero. An investment ...

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