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\begin{tabular}{|c|c|c|c|c|} \hline & A & B & C & D \\ \hline 1 & Year & Cash in ( Im ) & Cash out ( Im ) & Net \\ \hline 2 & 0 & 0 & (4.50) & (4.50) \\ \hline 3 & 1 & 0 & (2.00) & (2.00) \\ \hline 4 & 2 & 0.5 & (1.00) & (0.50) \\ \hline 5 & 3 & 0.7 & (0.10) & 0.60 \\ \hline 6 & 4 & 1 & (0.10) & 0.90 \\ \hline 7 & 5 & 1.5 & (0.10) & 1.40 \\ \hline 8 & 6 & 2 & (0.10) & 1.90 \\ \hline 9 & 7 & 2.2 & (0.10) & 2.10 \\ \hline 10 & 8 & 2.5 & (0.10) & 2.40 \\ \hline 11 & 9 & 2.8 & (0.10) & 2.70 \\ \hline 12 & 10 & 3 & (0.10) & 2.90 \\ \hline \end{tabular} Task 10 - Internal Rate of Return (IRR) The data for this task is preloaded into your Excel workbook. Metaverse Magic Limited (MML) is evaluating whether to build a new instance for its popular 19th century London product line. This instance will cover popular London-based artists, poets and writers of the time, with a focus on the visual arts. MLL will need to employ part-time and full-time staff from a range of disciplines and professions. Most of the MML's development and operational infrastructure is cloud-based so is expensed monthly as an operational expense. However, it will also need some capital expenditure on some new computer equipment. The project is being analysed over a tenyear business management and investment analysis timeframe. The company is currently funded by private equity and as such its base-level cost of capital hurdle-rate is quite high, at 11%. Product-marketing is leading this project and the team has come up with some initial estimated 'back-of-envelope' cashflows as set-out in your workbook. (a) Use the IRR interpolation formula to calculate the IRR for this proposed business investment project based on the initial cashflow estimates. Ensure here that you choose appropriate 'above the line' and 'below the line' interest rate figures to calculate the zero Net Present Value interest rate figure that yields your IRR answer. (2 marks) (b) Should the company pursue the project based on your answer above (1 mark) (c) Confirm your answer above by using the Excel IRR function. (1 mark) (d) Which approach do you think is more accurate? Why? (2 marks) (e) Why do you think the company might apply a higher hurdle rate? Give two brief points. (2 marks) (f) Explain one advantage and one disadvantage of the IRR technique of investment appraisal. (2 marks)

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