You Are Considering an Investment for Which You Require a Rate

question 96

Multiple Choice

You are considering an investment for which you require a rate of return of 8.5 percent.The investment costs $67,400 and will produce.cash inflows of $25,720 for three years.Should you accept this project based on its internal rate of return? Why or why not?

• A)Yes; because the IRR is 9.51 percent
• B)Yes; because the IRR is 7.08 percent
• C)Yes; because the IRR is 6.67 percent
• D)No; because the IRR is 7.08 percent
• E)No'; because the IRR is 9.51 percent

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Definitions:

Cash Dividends

A form of profit distribution by a corporation to its shareholders, paid in cash from the company's current or retained earnings.

Trading Securities

Financial assets that are purchased by an entity not for long-term investment but rather with the intention to sell them in the near term to make a profit.

Fair Value

The estimated market value of an asset or liability based on current market prices or valuations.

Fiscal Year

A one-year period used for accounting purposes and preparing financial statements, not necessarily aligning with the calendar year.