Assume a Project Has an Initial Cost of $207,600 and Cash

question 61

Multiple Choice

Assume a project has an initial cost of $207,600 and cash flows of $62,100,$99,100,and $105,300 for Years 1 to 3,respectively.The required discount rate is 11 percent,the required payback period is 3 years,and the required AAR is 13 percent.Should this project be accepted based on the two most commonly used methods of analysis by large firms? Justify your answer.

• A)Accept based on the positive NPV but reject based on the payback period.
• B)Accept based on the positive NPV and an IRR that exceeds the required discount rate.
• C)Reject based on the negative NPV and the long payback period.
• D)Accept based on payback and an IRR that exceeds the required discount rate.
• E)Reject based on the negative NPV and an IRR that is less than the required rate of return.

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Definitions:

Somatic Nervous System

A part of the peripheral nervous system that controls voluntary movements of the body and transmits sensory information to the central nervous system.

Sympathetic Nervous System

Part of the autonomic nervous system responsible for the body's 'fight or flight' response to stress.

Parasympathetic Nervous System

A branch of the autonomic nervous system responsible for conserving energy and bringing the body to a restful state.

Central Nervous System

The part of the nervous system consisting primarily of the brain and spinal cord, responsible for processing and sending out nerve signals.