Leanard,Inc

question 11

Multiple Choice

Leanard,Inc.is considering a very risky five-year project that has an initial outlay or cost of $70,000.The future cash inflows from its project for years 1,2,3,4,and 5 are all the same at $35,000.Leanard uses the internal rate of return method to evaluate projects.Will Leanard accept the project if its hurdle rate is 41.00%?

• A)Leanard will probably reject this project because its IRR is about 39.74%,which is slightly below its hurdle rate.
• B)Leanard will probably accept this project because its IRR is about 41.04%,which is slightly above its hurdle rate.
• C)Leanard will accept this project because its IRR is about 41.50%.
• D)Leanard will accept this project because its IRR is over 45.50%.

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Definitions:

Toledo

A city known for its rich history, located in central Spain, or a city in the U.S. state of Ohio.

Fallacy Of Composition

The error of assuming what is true of a part is automatically true of the whole.

Division

A logical fallacy where one assumes that what is true of a whole must also be true of its parts.

Slippery Slope Argument

A logical fallacy that argues a relatively small first step will lead to a chain of related events culminating in some significant effect, often negative.