Diamond Enterprises Is Considering a Project That Will Produce Cash

question 77

Multiple Choice

Diamond Enterprises is considering a project that will produce cash inflows of $238,000 a year for three years followed by $149,000 in year 4.What is the internal rate of return if the initial cost of the project is $749,000?

• A)3.43 percent
• B)4.29 percent
• C)5.81 percent
• D)6.32 percent
• E)7.55 percent

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Definitions:

Specialization

A strategy where individuals or entities focus on producing a limited range of goods or services, enhancing efficiency and expertise in their domain.

Exchange

The act of trading goods, services, or currencies between two or more parties.

Trading Partners

Countries, entities, or individuals that exchange goods, services, or resources among each other.

Law of Comparative Advantage

The principle that a country should specialize in producing and exporting goods in which it has the lowest opportunity cost and import goods in which it has a comparative disadvantage.