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      Question

      A project has IRR of 13%. Bank’s cost of funds is 8%

      and risk premium required is 4%. What is the correct credit decision?
      A Accept comfortably Correct Answer Incorrect Answer
      B Accept marginally Correct Answer Incorrect Answer
      C Reject as unviable Correct Answer Incorrect Answer
      D Defer for review Correct Answer Incorrect Answer
      E Convert to WC loan Correct Answer Incorrect Answer

      Solution

      Hurdle rate = 8 + 4 = 12% IRR = 13% → just above hurdle

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