Compute the IRR for Project X and Note Whether the Firm

question 41

Multiple Choice

Compute the IRR for Project X and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 9 percent.
$$\begin{array}{l}\begin{array} {| l | l | l | l | l | l | l |}\hline\text {Time: }&0&1&2&3&4&5\\\hline\text {Cash flow:}&-1,000&-75&100&100&0&2,000\\\hline\end{array}\end{array}$$

• A) 9 percent, accept
• B) 9 percent, reject
• C) 16.61 percent, accept
• D) 16.61 percent, reject

---

Definitions:

Market Values

The current price at which an asset or service can be bought or sold in an open and competitive marketplace.

Yield To Investors

The total return anticipated on an investment, expressed as an annual percentage, accounting for all income and capital gains.

Marginal Tax Rate

The rate at which the last dollar of a taxpayer's income is taxed, indicating how much of additional income will be taken in taxes.

Beta

A measure of a stock's volatility or risk as compared to the overall market, indicating how much the stock’s price is expected to move relative to market movements.