Given the Following Expected Cash Flow Stream, Determine the IRR

question 19

Multiple Choice

Given the following expected cash flow stream, determine the IRR of the proposed investment in an income producing property and determine whether or not the investment should be pursued using IRR as your decision making criteria. Investment Horizon: 5 years; Expected Yearly Cash Flow in each of the next five years: $127,628. Expected Sale Price at end of 5 years: $1,595,350; Required return on equity: 5%; Current Market Price of Property: $1,750,000

• A) IRR is 4.92%; Decision is to invest
• B) IRR is 4.92%; Decision is to not invest
• C) IRR is 5.72%; Decision is to invest
• D) IRR is 5.72%; Decision is to not invest

---

Definitions:

Misrepresentation

The act of providing false, misleading, or incorrect information typically in a contractual context, leading to an erroneous belief by another party.

Material Omission

The failure to include vital information that results in a deceptive representation, significant in legal and financial disclosures.

FTC Rules

Regulations established by the Federal Trade Commission, the agency responsible for enforcing antitrust and consumer protection laws in the United States.

Truth-In-Lending Act

A U.S. federal law designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs.