Union Atlantic Corporation, Which Has a Required Rate of Return

question 56

Multiple Choice

Union Atlantic Corporation, which has a required rate of return equal to 14 percent, is evaluating a capital budgeting project that requires an initial investment of $170,000. The project will generate a $60,750 cash inflow at the year-end of each of the next four years. According to this information, which of the following statements is correct?

• A)The project is acceptable if its internal rate of return (IRR) is less than 14 percent.
• B)The project is acceptable if its discounted payback period is greater than its economic life.
• C)The project is acceptable because its net present value is positive.
• D)The project's is acceptable if its discounted payback period is less than the traditional payback period.
• E)The project is not acceptable because its net present value is less than the future value of the cash flows it is expected to generate during its life.