A Company Is Considering a 5-Year Project

question 25

Multiple Choice

A company is considering a 5-year project.The company plans to invest $60,000 now and it forecasts cash flows for each year of $16,200.The company requires a hurdle rate of 12%.Calculate the internal rate of return to determine whether it should accept this project.Selected factors for a present value of an annuity of 1 for five years are shown below:
Interest rate Present value of an annuity of 1 factor
10% 3.7908
12% 3.6048
14% 3.4331

• A)The project should be accepted.
• B)The project should be rejected because it earns more than 10%.
• C)The project earns more than 10% but less than 12%.If the hurdle rate is 12%, the project should be rejected.
• D)Only 9% is acceptable.
• E)Only 10% is acceptable.

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Definitions:

Hebb Rule

a theory in neuroscience that proposes an increase in synaptic efficacy arises from the presynaptic cell's repeated and persistent stimulation of the postsynaptic cell.

Synapse

A junction between two nerve cells, consisting of a minute gap across which impulses pass by diffusion of a neurotransmitter.

Long-Term Potentiation

A process, hypothesized to be a mechanism for long-term learning, in which neural circuits in the hippocampus are subjected to repeated and intense electrical stimulation, resulting in hippocampal cells that are more sensitive to stimuli than they were previously.

Long-Term Potentiation

A long-lasting enhancement in signal transmission between two neurons that results from stimulating them synchronously, believed to be a cellular basis for learning and memory.