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A Project Costing $20,000 Generates Cash Inflows of $9,000 Annually

question 94

Multiple Choice

A project costing $20,000 generates cash inflows of $9,000 annually for the first three years, followed by cash outflows of $1,000 annually for two years.At most, this project has ______ different IRR(s) .


Definitions:

Optimal Capital Budget

The set of projects that maximizes the value of the firm.

Retained Earnings

The portion of a company’s net profits which is kept within the company instead of being paid out to the shareholders as dividends.

Dividend Reinvestment Plans

Programs that allow investors to automatically reinvest their cash dividends into additional shares or fractional shares of the underlying stock.

Open Market

A freely competitive market where buyers and sellers can engage in transactions with minimal government intervention.

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