Toy Town Is Considering a New Toy with Initial Costs

question 61

Multiple Choice

Toy Town is considering a new toy with initial costs of $35,900.This toy is expected to produce cash flows of $52,500 in Year 1,$11,300 in Year 2,and nothing thereafter.The discount rate assigned to the toy is 18.7 percent.What is the IRR?

• A)65.28%
• B)24.79%
• C)38.03%
• D)56.65%
• E)20.04%

---

Definitions:

Symmetrical

A characteristic of shapes, graphs, or distributions in which the two halves mirror each other when divided by a central line or point.

Non-Negative

A term to describe numbers that are both positive and zero, but not negative.

Chi-Squared Distribution

A probability distribution that arises in statistics as the distribution of the sum of the squares of k independent standard normal random variables.

Variance

A statistical measure of the dispersion of a set of data points in relation to their mean.