Project using the irr method

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Fun Inc.'s corporate tax rate is 35%. It has 4,000 coupon paying bond outstanding with $1,000 per value, 20-year maturity, and a coupon rate of 7%. The bonds are currently selling for 103% of the par value. The bonds make semi-annual interest payments. Fun Inc. also has 90,000 common shares outstanding, selling for $57 per share. The firm has a market beta of 1.10. Market risk premium is currently 8% and risk-free rate is 6%. The firm is considering a project. This project requires an initial investment of $11.5 million and promises to yield annual earnings of $1.4 million perpetually. Determine whether the firm should take the project using the IRR method. Please show all necessary computation including the WACC and make your conclusion.

Reference no: EM132185273

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