A Project Has an Initial Requirement of $698,700 for Fixed

question 71

Multiple Choice

A project has an initial requirement of $698,700 for fixed assets and $61,000 for net working capital. The fixed assets will be depreciated to a zero book value over the 4-year life of the project and will be worthless at the end of the project. All of the net working capital will be recouped after 4 years. The expected annual operating cash flow is $218,000. What is the project's internal rate of return if the tax rate is 35 percent?

• A) 7.72 percent
• B) 8.41 percent
• C) 8.69 percent
• D) 9.11 percent
• E) 9.97 percent

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Definitions:

Post-secondary Education

Education that occurs after high school, including programs at colleges, universities, and technical schools.

Anticipate

To expect or predict something based on current knowledge or trends, often involving preparation for a known event or condition.

Compounded Semi-annually

The process of applying interest to an initial sum and the accrued interest on that sum every six months.

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Pre-arranged agreements to pay a certain amount at specific times, often used in loans and financial agreements.