Consider a Project with the Following Stream of Cash Flows

question 30

Multiple Choice

Consider a project with the following stream of cash flows. What's the IRR of the project? If a firm's cost of capital is 15%,should the firm accept the project?

• A) 10%,25%,50%; accept the project
• B) 10%,25%,50%; reject the project
• C) 0%,10%,25%,50%; accept the project
• D) 10%,25%; accept the project

---

Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present value, essentially reflecting the opportunity cost of capital.

Present Value

The up-to-date valuation of a future financial sum or cash flow sequence, considering a determined rate of return.

Present Value Factor

A factor used to calculate the present value of a future amount of money or stream of payments, based on a specific rate of return.

Discount Factor

A multiplicative factor used to calculate the present value of future cash flows or income streams, reflecting the time value of money.