Project a Has a Five-Year Life and an Initial Cost

question 292

Multiple Choice

Project A has a five-year life and an initial cost of $1,600 and annual cash flows of $600 per year. Project B also has a five-year life and an initial cost of $2,500 with annual cash flows of $850 per year. Given this information, calculate the IRR cross-over rate.

• A) 12.05%
• B) 12.25%
• C) 12.45%
• D) 12.65%
• E) 12.85%

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Definitions:

Present

Current time or the moment that is happening now.

Future Extraction

Strategic planning for the removal or usage of natural resources, regarding supply and demand, technological advancements, and environmental impacts.

Total Allowable Catch

The maximum quantity of a particular fish species that can be caught within a specified area and time frame to prevent overfishing.

Individual Transferable Quota

A system in resource management where individuals or companies are allocated a certain amount of a resource and can buy, sell, or trade parts of that quota.