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

question 39

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 statistic for the project are three and three and a half years, respectively. $$\begin{array} { l l l l l l l } \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 \\\text { Cash Flow } & - 100,000 & 30,000 & 45,000 & 55,000 & 30,000 & 10,000\end{array}$$ Use the IRR decision rule to evaluate this project; should it be accepted or rejected?

• A)-4.95 percent, reject
• B)4.95 percent, accept
• C)-23.18 percent, reject
• D)23.18 percent, accept

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Definitions:

Percentage

A mathematical term expressing a number or ratio as a fraction of 100, used to compare proportions.

Aphasic

Pertaining to aphasia, a condition characterized by the loss of the ability to understand or express speech, caused by brain damage.

Apraxic

Refers to the impairment in the ability to perform movements or gestures, despite having the physical ability to do so, usually due to brain damage.

Posterior Lesions

Damage or abnormalities found on the back part of an organ or the body, often referring to areas in the brain or spinal cord.