The Capital Budgeting Director of Sparrow Corporation Is Evaluating a Project

question 81

Multiple Choice

The capital budgeting director of Sparrow Corporation is evaluating a project which costs R200,000, is expected to last for 10 years and produce after-tax cash flows, including depreciation, of R44,503 per year.If the firm's required rate of return is 14 percent and its tax rate is 40 percent, what is the project's IRR?

• A) 8%
• B) 14%
• C) 18%
• D) -5%
• E) 12%

---

Definitions:

Accounts Payable

Accounts payable are short-term liabilities representing money a company owes to suppliers or creditors for products and services received but not yet paid for.

Accounts Receivable

The money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.

Cash Collections

The process of receiving payment from customers for goods or services provided, impacting the company’s cash flow.

Merchandise Inventory

The total value of a company's goods that are ready for sale to customers at any given time, reflecting in its balance sheet.