Union Atlantic Corporation, Which Has a Required Rate of Return

question 63

Multiple Choice

Union Atlantic Corporation, which has a required rate of return equal to 14 percent, is evaluating a capital budgeting project that has the following characteristics: $$\begin{array} { c r } \underline{ \text { Year }} & \underline{\text { Cash Flows }} \\ 0 & \$ ( 170,097 ) \\1 & 60,750 \\2 & 60,750 \\3 & 60,750 \\4 & 60,750\end{array}$$ Union Atlantic's capital budgeting manager has determined that the project's net present value is $7,008.According to this information, which of the following statements is correct?

• A)The project's internal rate of return (IRR) must be greater than 14 percent.
• B)The project's discounted payback must be less that its economic life.
• C)The project should be purchased by Union Atlantic.
• D)All of these statements are correct.
• E)None of these statements is correct.

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