An Investment Project Requires a Net Investment of $100,000

question 55

Multiple Choice

An investment project requires a net investment of $100,000. The project is expected to generate annual net cash inflows of $28,000 for the next 5 years. The firm's cost of capital is 12%. Determine the internal rate of return for the project (to the nearest tenth of one percent) .

• A) 12.0%
• B) 12.6%
• C) 3.6%
• D) 12.4%

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Definitions:

Straight-Line Method

A depreciation method that allocates an equal amount of depreciation each year over the useful life of the asset.

Defined Benefit Pension Plan

A type of pension plan where an employer commits to pay a specified pension amount to the retiree, based on factors like salary history and duration of employment.

Pension Expense

The company's cost in a specific period for providing pension benefits to employees during that period.

Funding Agency

An organization that provides financial support for various projects or enterprises.