A Firm Is Trying to Determine If It Should Launch

question 113

Multiple Choice

A firm is trying to determine if it should launch a product. The product has an expected life of three years. It will bring in cash flows of $5,000 in the first year, $4,000 in the second year, and $3,000 in the third year. The company estimates that it will invest $9,500 in product research and development costs. What is the estimated IRR for this product? Choose the IRR value that is closest to the amount invested.

• A) 7%
• B) 14%
• C) 21%
• D) 28%

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Definitions:

Archegonium

A female reproductive structure found in ferns, mosses, and some conifers and flowering plants, producing a single egg cell for fertilization.

Sporangium

A spore case, found in plants, certain protists, and fungi.

Xylem

The vascular tissue that conducts water and dissolved minerals in plants.

Phloem

The vascular tissue in plants responsible for transporting sugars and other metabolic products downward from the leaves.