GuSont Inc The Internal Rate of Return (IRR) Is (Note: to Solve

question 141

Multiple Choice

GuSont Inc. was considering an investment in the following project: $\begin{array}{lrr}\text { Required initial investment } & \$ 990,000 \\\text { Net annual after-tax cash inflow } & \$ 165,000 \\\text { Annual depreciation expense }(\$ 990,000-\$ 165,000) / 15 \text { years } & \$ 55,000 \\\text { Estimated salvage value } & \$ 165,000 \\\text { Life of the project in years } & 15\end{array}$ The internal rate of return (IRR) is (Note: to solve this problem students will need access either to Appendix C, Table 2 (Chapter 12) or to Excel) :

• A) Less than 10%.
• B) Somewhere between 10% and 12%.
• C) Somewhere between 12% and 14%.
• D) Somewhere between 14% and 15%.
• E) Greater than 15%.

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Definitions:

Stimulus

A signal or piece of data that elicits or influences a physiological or psychological response or activity.

Operant Conditioning

A learning theory which posits that behavior can be changed through the use of consequences, such as rewards or punishments.

Stimulus

Any event or situation that evokes a response from an organism in psychology and biology.

Correlation Coefficient

A statistical measure that indicates the extent to which two variables change together, but does not imply causation.