You Require an IRR of 14% to Accept a Project

question 59

Multiple Choice

You require an IRR of 14% to accept a project. If the project will yield $10,000 per year for 10 years, what is the maximum amount that you would be willing to invest in the project?

• A)Less than $50,000
• B)More than $50,000 and less than $60,000
• C)More than $60,000 and less than $70,000
• D)More than $70,000

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Definitions:

Antidilutive

Refers to financial transactions or securities that, if exercised or converted into common stock, would increase earnings per share.

Treasury Stock Method

An accounting method used to calculate the number of shares outstanding when considering stock options and warrants, assuming these are exercised and the treasury stock is sold.

Convertible Bond

A type of bond that can be converted into a predetermined amount of the issuing company's equity at certain times during its life, usually at the discretion of the bondholder.

Stock Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a stock at a predetermined price within a specific timeframe.