Drinkable Water Systems Is Analyzing a Project with Projected Cash

question 14

Multiple Choice

Drinkable Water Systems is analyzing a project with projected cash inflows of $127,400, $209,300, and -$46,000 for Years 1 to 3, respectively. The project costs $251,000 and has been assigned a discount rate of 12.5 percent. Should this project be accepted based on the discounting approach to the modified internal rate of return? Why or why not?

• A) Yes; The MIRR is 11.85 percent.
• B) No; The MIRR is 11.33 percent.
• C) Yes; The MIRR is 11.33 percent.
• D) No; The MIRR is 11.68 percent.
• E) No; The MIRR is 11.85 percent.

---

Definitions:

Long Hours

The situation of working a significantly larger number of hours than the standard working time, often leading to stress and health issues.

Own-Price Elasticity

A measure of the responsiveness of the demand for a good to a change in its own price.

Lipitor

A pharmaceutical drug used to lower cholesterol and reduce the risk of heart disease.

Few Substitutes

A market condition where there are limited alternative products or services available to consumers.