Down Under Stores Is Considering an Investment with an Initial

question 86

Multiple Choice

Down Under Stores is considering an investment with an initial cost of $236,000.In Year 4,the project will require an additional investment and finally,the project will be shut down in Year 7.The annual cash flows for Years 1 to 7,respectively,are projected as $64,000,$87,000,$91,000,−$48,000,$122,000,$154,000,and −$30,000.If all negative cash flows are moved to Time 0 using a discount rate of 13 percent,what is the project's modified IRR?

• A)15.44 percent
• B)17.67 percent
• C)18.54 percent
• D)14.91 percent
• E)22.08 percent

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Definitions:

Barter

The direct exchange of goods or services for other goods or services without the use of money.

Benevolence

The quality of being well-meaning and kindly; a desire to help others.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision, representing the benefits one could have received by taking the alternative action.

Manufacturing

The process of converting raw materials or components into finished goods through the use of tools, human labor, machinery, and chemical processing.