Western Beef Exporters Is Considering a Project That Has an NPV

question 40

Multiple Choice

Western Beef Exporters is considering a project that has an NPV of $32,600, an IRR of 15.1 percent, and a payback period of 3.2 years. The required return is 14.5 percent and the required payback period is 3.0 years. Which one of the following statements correctly applies to this project?

• A) The net present value indicates accept while the internal rate of return indicates reject. 
• B) Payback indicates acceptance. 
• C) The payback decision rule could override the accept decision indicated by the net present value. 
• D) The payback rule will automatically be ignored since both the net present value and the internal rate of return indicate an accept decision. 
• E) The net present value decision rule is the only rule that matters when making the final decision. 

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Definitions:

Percentage Form

A way of expressing numbers as a fraction of 100, symbolized by the percent sign (%).

Sticker Price

The full retail price of a vehicle, as displayed on a sticker in the car's window; commonly used to refer to the initial asking price of goods.

GST

The Goods and Services Tax is a form of value-added tax applied to almost all goods and services purchased for use within the nation.

PST

Provincial Sales Tax; a tax levied by certain provinces in Canada on the sale of goods and services.