Pet World Is Considering a Project That Has the Following

question 43

Multiple Choice

Pet World 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 cost of capital (and even negative) , in which case it will be rejected. $$\begin{array} { l c c c c c c } \text { Year } & 0 & 1 & 2 & 3 & 4 & 5 \\\hline \text { Cash flows } & - \$ 9,500 & \$ 2,000 & \$ 2,025 & \$ 2,050 & \$ 2,075 & \$ 2,100\end{array}$$

• A) 2.08%
• B) 2.31%
• C) 2.57%
• D) 2.82%
• E) 3.10%

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Definitions:

Negotiable

A characteristic of documents or instruments that allows them to be transferred or endorsed from one party to another, altering ownership.

Payment

The act of giving money or other compensation to settle a transaction or obligation.

Fund

A collection of money set aside for a specific purpose or invested to generate income.

Exist

To have actual being or reality.