Compute the IRR Statistic for Project X and Note Whether $$\begin{array} { l l l l l l l } \text { Time: } & 0 & 1 & 2 & 3 & 4 & 5 \\\text { Cash flow: } & - 75 & - 75 & 0 & 100 & 75 & 50\end{array}$$

question 86

Multiple Choice

Compute the IRR statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent. $$\begin{array} { l l l l l l l } \text { Time: } & 0 & 1 & 2 & 3 & 4 & 5 \\\text { Cash flow: } & - 75 & - 75 & 0 & 100 & 75 & 50\end{array}$$

• A)10 percent, accept
• B)10 percent, reject
• C)13.26 percent, accept
• D)13.26 percent, reject

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Definitions:

Expiration

In finance, this term typically refers to the date on which a contract, such as an option or futures contract, ceases to exist and the final settlement or exercise must occur.

Selling

The process of giving or exchanging an item of value for money; a fundamental concept in economics and commerce.

S&P 100 Index

Is a stock market index that measures the stock performance of 100 major companies listed on stock exchanges in the United States.

Exercise Price

The predetermined price at which the holder of an option can buy (call option) or sell (put option) the underlying security or commodity.