An Asset Is Purchased for $100,000

question 41

Multiple Choice

An asset is purchased for $100,000. It is expected to provide an additional $15,600 of annual net cash inflows. The asset has a 10-year life and no expected salvage value. The hurdle rate is 10%. Assume the following present value factors: Given the data provided, the internal rate of return would be approximately:

• A) 12%
• B) 10%
• C) 9%
• D) 8%

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Definitions:

Well-Organized Markets

Refers to financial markets that are structured efficiently, facilitating the seamless exchange of securities.

Dollar Return

The total gain or loss on an investment expressed in monetary terms, considering both capital gains and dividends or interest.

Shares

Portions of ownership in a corporation or financial entity, shares guarantee an equal share in dividend payouts, contingent on profit declarations.

Dividend

A share of a company's profits distributed to its shareholders, often expressed as a dollar amount per share.