Shanghai Shipping Is Considering Investing in a Project That Requires

question 10

Multiple Choice

Shanghai Shipping is considering investing in a project that requires an after-tax initial investment of 156 million and is expected to produce after-tax cash inflows of $40 million for each of the next five years.The firm's cost of capital is 8%.Based on this information, the IRR of the project is _________ percent and the firm should _________ the project.

• A)9.9; accept
• B)-9.9, reject
• C)8.9, accept
• D)-8.9, reject
• E)none of the above

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Definitions:

LIFO Inventory

An inventory valuation method where the last items added to inventory are the first ones to be used or sold.

Merchandise Inventory

Goods that a company holds for the purpose of selling them to customers, often a significant asset on the balance sheet for retailers.

Lower Of Cost

A principle in accounting that dictates inventory or other assets should be reported at the lower amount between its historical cost and its market value.