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

question 6

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 12 percent, and that the maximum allowable payback and discounted payback statistic for the project are two and two and a half years, respectively.
$$\begin{array} { | l | c | c | c | c | c | c | } \hline \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 \\\hline \text { Cash Flow } & - 125,000 & 65,000 & 78,000 & 105,000 & 105,000 & 25,000 \\\hline\end{array}$$
Use the MIRR decision rule to evaluate this project; should it be accepted or rejected?

• A) 12.00 percent, reject
• B) 31.21 percent, accept
• C) 54.22 percent, accept
• D) 80.67 percent, accept

Recognize the significance of reaching new markets and users through market modification.

Understand how creating new use situations contributes to market modification.

Identify examples of reducing product features or quality (downsizing) within product strategy.

Understand the impact of consumer perception on product positioning and repositioning strategies.