Which of the Following Statements Is Most Likely Correct for a Project

question 111

Multiple Choice

Which of the following statements is most likely correct for a project costing $50,000 and returning $14,000 per year for five years?

• A)NPV = $3,071.01
• B)NPV = $20,000
• C)IRR = 2.8 percent
• D)IRR is greater than 10 percent $50,000 = $14,000

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Definitions:

Implicit Interest Rate

The interest rate that equates the present value of lease payments to the fair value of the leased asset, often used in lease agreements.

Capital Lease

A lease agreement that is considered a purchase by the lessee because of its terms, such as a bargain purchase option, which allow for the transfer of ownership over the asset's life.

Residual Value

The estimated value of an asset at the end of its useful life.