Simms Corp

question 23

Multiple Choice

Simms Corp.is considering a project that has the following cash flow data.What is the project's IRR? Note that a project's IRR can be less than the WACC or negative, in both cases it will be rejected.

• A)12.55%
• B)13.21%
• C)13.87%
• D)14.56%
• E)15.29%

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Definitions:

Capital Leases

Leasing agreements classified as purchases of assets for accounting purposes, due to their terms transferring substantial ownership rights to the lessee.

Sales-Type Leases

Leases where the lessor recognizes immediate profit on the transaction, similar to a sale, typically in equipment or vehicle leasing.

Direct-Financing Leases

Direct-Financing Leases are lease agreements where the lessor essentially acts as a financier, purchasing an asset and leasing it to the lessee, without assuming risk of ownership.

Capital Lease

A lease classified as a financial transaction where the lessee effectively buys an asset and finances it over the lease term.