Suppose Your Firm Is Considering Investing in a Project with the Cash

question 10

Multiple Choice

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Use the IRR decision to evaluate this project; should it be accepted or rejected? $$\begin{array} { l c c c c c c c } \hline \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \\\hline \text { Cash Flow } & - \$ 5,000 & \$ 1,200 & \$ 1,400 & \$ 1,600 & \$ 1,600 & \$ 1,100 & \$ 2,000 \\\hline\end{array}$$

• A)IRR = 16.92 percent; accept the project
• B)IRR = 7.123 percent; reject the project
• C)IRR = 18.32 percent; accept the project
• D)IRR = 7.59 percent; reject the project

---

Definitions:

Insomnia

A common sleep disorder characterized by difficulty falling and/or staying asleep, affecting an individual's quality of life and health.

Cortisol

A steroid hormone released by the adrenal glands in response to stress and low blood glucose, playing a crucial role in metabolism, inflammation, and the body's stress response.

Diuresis

Increased or excessive production of urine by the kidneys, often as a physiological response or due to certain substances.

Electrolyte Imbalance

A condition involving an abnormal level of minerals and salts in the body, which can disrupt bodily functions.