A Firm Considers a Project with the Following Cash Flows

question 98

Multiple Choice

A firm considers a project with the following cash flows: time-zero = +20,000,years 1-5 = -4,500.Should the project be accepted if the cost of capital is 10%?

• A) Yes, the IRR of the project is 4.06%.
• B) Yes, the IRR of the project is 12.5%.
• C) No, the IRR of the project is 4.06%.
• D)No, the IRR of the project is 12.5%.

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Definitions:

Natural Rate

The natural rate is a concept in economics describing conditions where the economy is at equilibrium, with full employment and no inflationary or deflationary pressures.

Aggregate Supply

The aggregate amount of products and services that companies in an economy are prepared and able to offer at a specific general price level during a certain time frame.

Natural Rate

Refers to the equilibrium rate of unemployment or interest where the economy is stable, without accelerating inflation.

Unemployment

The situation in which individuals who are capable of working and actively seeking work are unable to find employment.