Suppose Your Firm Is Considering Investing in a Project with the Cash

question 100

Multiple Choice

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are three and a half and four and a half years, respectively. Use the MIRR decision to evaluate this project; should it be accepted or rejected?
$$\begin{array} { l c c c c c c c c c } \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \\\text { Cash Flow } & - \$ 5,000 & \$ 1,200 & \$ 1,400 & \$ 1,600 & \$ 1,600 & \$ 1,100 & \$ 2,000\end{array}$$

• A) MIRR = 13.59 percent, accept the project
• B) MIRR = 7.96 percent, reject the project
• C) MIRR = 7.19 percent, reject the project
• D) MIRR = 12.58 percent, accept the project

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Definitions:

Georg Wilhelm Friedrich Hegel

A German philosopher of the late Enlightenment period whose dialectical method emphasized the progression of thesis, antithesis, and synthesis.

Karl Marx

A 19th-century philosopher, economist, and political theorist known for his critique of capitalism and his influence on the development of socialist thought.

Friedrich Engels

A 19th-century German philosopher, social scientist, and co-author with Karl Marx of various works, including "The Communist Manifesto," known for his contributions to Marxist theory.

Social Analysis

The examination and critical evaluation of social structures, interactions, and dynamics to understand societies and their complexities.