A Firm Evaluates All of Its Projects by Applying the IRR

question 77

Multiple Choice

A firm evaluates all of its projects by applying the IRR rule.The required return for the following project is 21 percent.The IRR is _____ percent and the firm should ______ the project.

• A)16.05 percent; reject
• B)16.05 percent; accept
• C)24.26 percent; reject
• D)26.30 percent; accept
• E)26.30 percent; reject

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Definitions:

Open Market Sale

The selling of government bonds and securities in the open market to decrease the money supply.

Money Supply

The whole of economic resources in an economy, represented by cash, coins, and checking and savings accounts' balances, at a given time.

Excess Reserves

Excess reserves refer to the capital reserves held by a bank or financial institution in excess of what is required by regulations, guidelines, or central bank requirements.

Individual Bank

A financial institution that deals with consumers and businesses to offer deposit, loan, and investment services on an individual basis.