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:

Cash Dividend

Payment made by a company out of its earnings to shareholders in the form of cash, representing a share of the corporate profits.

Decrease in Dividends

A reduction in the amount paid out to shareholders from a company's earnings, often signaling a change in financial health or strategy.

Deteriorating Earnings

A condition where a company experiences a decline in profitability and earnings over time.

Dividend Income

Income received from owning shares of a company that pays dividends, which is a portion of the company's earnings distributed to shareholders.