A Project Has an Initial Cash Inflow of $87,700 and Cash

question 73

Multiple Choice

A project has an initial cash inflow of $87,700 and cash flows of -$48,700 in Year 1 and -$57,200 in Year 2.The discount rate is 14 percent.Should this project be accepted or rejected based on IRR? Why?

• A)Accepted,because this is a financing project and the IRR is less than the discount rate.
• B)Rejected,because this is an investing project and the IRR is less than the discount rate.
• C)Accepted,because this is a financing project and the IRR is greater than the discount rate.
• D)Rejected,because this is an investing project and the IRR is greater than the discount rate.
• E)Accepted,because the IRR equals the discount rate.

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Definitions:

Groups

Collections of individuals or items classified together based on common characteristics or attributes.

One-way ANOVA

A statistical method used to compare the means of three or more independent groups to ascertain if there are any statistically significant differences among them.

F-ratio

A statistical measure used in the analysis of variance (ANOVA), calculated by dividing the variance among group means by the variance within the groups.

Null Hypothesis

A default hypothesis that there is no effect or no difference, used as a starting point for statistical significance testing.