Bill Plans to Open a Do-It-Yourself Dog Bathing Center in a Storefront

question 244

Multiple Choice

Bill plans to open a do-it-yourself dog bathing center in a storefront. The bathing equipment will cost $160,000. Bill expects the after-tax cash inflows to be $40,000 annually for seven years, after which he plans to scrap the equipment and retire to the beaches of Jamaica.

Assume the required return is 17%. What is the project's IRR? Should it be accepted?

• A) 12.2%; yes
• B) 12.2%; no
• C) 16.3%; yes
• D) 16.3%; no
• E) 17.0%; indifferent

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Definitions:

Visceral Muscle

Smooth muscle found within the walls of internal organs that contracts involuntarily, involved in various bodily functions such as digestion and blood flow regulation.

Smooth Muscle

A type of muscle tissue that is not under voluntary control, found in the walls of internal organs, such as the stomach, intestines, and blood vessels.

Flaccid

Pertaining to muscle weakness or softness, often indicating a lack of muscle tone.

Rigor Mortis

A postmortem condition where the muscles of the body stiffen due to chemical changes, occurring several hours after death.