The Benefit-Cost Ratio for a Project with an Initial Outlay

question 51

Multiple Choice

The benefit-cost ratio for a project with an initial outlay of $9000 and net cash flows of $5000 p.a.for the next three years and a required rate of return of 10% p.a.is:

• A)$3434.
• B)0.3815
• C)1.21
• D)1.3815

---

Definitions:

IRR

Internal Rate of Return is a financial metric used to evaluate the profitability of potential investments, representing the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Mutually Exclusive

Describes options or projects that cannot both be chosen such that if one is selected, the other must be rejected.

Value Foregone

The potential value lost when choosing one investment or action over another, often considered an opportunity cost.

Required Rate of Return

The minimum return an investor expects to achieve on an investment, considering the risk involved.