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

question 114

Multiple Choice

Which of the following statements is most likely correct for a project costing $50,000 and returning $14,000 per year for 5 years?

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

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Definitions:

Market Price

The ongoing cost for buying or selling an asset or service within a market setting.

Acid-Test Ratio

A stringent indicator of a company's liquidity, calculated by dividing liquid assets excluding inventories by current liabilities.

Company

A business organization founded by a group of individuals dedicated to pursuing and administering a commercial or industrial venture.

Acid-Test Ratio

A liquidity ratio that measures a company's ability to pay off its current liabilities with quick assets (cash, marketable securities, and accounts receivable).