A Firm Is Trying to Determine If It Should Launch

question 109

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 $10,000 in the first year, $9,000 in the second year, and $7,500 in the third year. The company estimates that it will invest $20,000 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) 5%
• B) 12%
• C) 15%
• D) 16%

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Definitions:

Easy Tasks

Activities or jobs that can be completed with minimal effort or difficulty.

Internal Push

An internal motivation or drive that compels an individual to take action or pursue goals.

External Pull

Influences or factors outside an individual that draw or entice them towards certain decisions, actions, or behaviors.

Incentive

Something that motivates or encourages someone to do something or increases the likelihood of a behavior.