An Investment Has the Following Cash Flows

question 21

Multiple Choice

An investment has the following cash flows. Should the project be accepted if it has been assigned a required return of 9.5%? Why or why not?

• A) yes; because the IRR exceeds the required return by about 0.39%.
• B) yes; because the IRR is less than the required return by about 3.9%.
• C) yes; because the IRR is positive.
• D) no; because the IRR exceeds the required return by about 3.9%.
• E) no; because the IRR is 9.89%.

---

Definitions:

Net Loss

The amount by which expenses exceed revenues over a specific period, indicating a negative financial performance.

Target Profits

The specific amount of net income a company aims to achieve within a certain time frame.

Variable Expenses

Costs that vary in direct proportion to changes in the level of activity or production volume.