Soft and Cuddly Is Considering a New Toy That Will

question 76

Multiple Choice

Soft and Cuddly is considering a new toy that will produce the following cash flows.Should the company produce this toy based on IRR if the firm requires a rate of return of 17.5 percent? $$\begin{array} { | c | r | } \hline \text { Year } & \text { Cash Flow } \\\hline 0 & - \$ 132,000 \\\hline 1 & 97,000 \\\hline 2 & 42,000 \\\hline 3 & 28,000 \\\hline\end{array}$$

• A)Yes, because the project's rate of return is 16.45 percent
• B)Yes, because the project's rate of return is 11.47 percent
• C)No, because the project's rate of return is 16.45 percent
• D)No, because the project's rate of return is 11.47 percent
• E)No, because the internal rate of return is zero percent

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