A company has an investment project that would cost $10 million today and yields payoff of $15 million in 4 years. Should the firm undertake the project if the interest rate is 11%? 10%, 9 %, or 8%?
Can you figure the exact interest rate at which each firm would be indifferent between undertaking and foregoing the project? (Thisinterest rate is called the project's internal rate of return.)
