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

question 29

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 MIRR decision rule to evaluate this project; should it be accepted or rejected?

• A)-10.60 percent, reject
• B)10.60 percent, accept
• C)-15.33 percent, reject
• D)15.33 percent, accept

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