Tressor Company Is Considering a 5-Year Project

question 35

Multiple Choice

Tressor Company is considering a 5-year project.The company plans to invest $90,000 now and it forecasts cash flows for each year of $27,000.The company requires that investments yield a discount rate of at least 14%.Selected factors for a present value of an annuity of 1 for five years are shown below: Calculate the internal rate of return to determine whether it should accept this project.

• A)The project should be accepted because it will earn more than 14%.
• B)The project should be accepted because it will earn more than 10%.
• C)The project will earn more than 12% but less than 14%.At a hurdle rate of 14%,the project should be rejected.
• D)The project should be rejected because it will earn less than 14%.
• E)The project should be rejected because it will not earn exactly 14%.

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