A Firm Is Evaluating Two Independent Projects Utilizing the Internal

question 12

Multiple Choice

A firm is evaluating two independent projects utilizing the internal rate of return technique. Project X has an initial investment of €80,000 and cash inflows at the end of each of the next five years of €25,000. Project Z has a initial investment of €120,000 and cash inflows at the end of each of the next four years of €40,000. The firm should

• A) accept only X if the cost of capital is at most 15 percent.
• B) accept both if the cost of capital is at most 15 percent.
• C) none of the above
• D) accept only Z if the cost of capital is at most 15 percent.