Western Beef Exporters Is Considering a Project That Has an NPV

question 40

Multiple Choice

Western Beef Exporters is considering a project that has an NPV of $32,600, an IRR of 15.1 percent, and a payback period of 3.2 years. The required return is 14.5 percent and the required payback period is 3.0 years. Which one of the following statements correctly applies to this project?

• A) The net present value indicates accept while the internal rate of return indicates reject. 
• B) Payback indicates acceptance. 
• C) The payback decision rule could override the accept decision indicated by the net present value. 
• D) The payback rule will automatically be ignored since both the net present value and the internal rate of return indicate an accept decision. 
• E) The net present value decision rule is the only rule that matters when making the final decision. 

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Definitions:

Compound-Interest GIC

A Guaranteed Investment Certificate where the interest is compounded at regular intervals, leading to an increase in the amount earned over time.

Compounded Semiannually

An interest calculation method where the interest is added to the principal twice a year, leading to interest on interest in the subsequent periods.

Compounded Monthly

A method where interest earnings are calculated and added to the principal sum each month, effectively earning interest on the interest from the previous month.

Compounded Semiannually

A different phrase for interest calculation done two times a year, where interest is added to the principal for future interest calculation.