Use the Information for the Question(s)below

question 32

Multiple Choice

Use the information for the question(s) below.
Larry the Cucumber has been offered $14 million to star in the lead role of the next three Larry Boy adventure movies.If Larry takes this offer,he will have to forgo acting in other Veggie movies that would pay him $5 million at the end of each of the next three years.Assume Larry's personal cost of capital is 10% per year.
-Larry should:

• A)reject the offer because the NPV < 0.
• B)accept the offer even though the IRR < 10%,because the NPV > 0.
• C)reject the offer because the IRR < 10%.
• D)accept the offer because the IRR > 0%.

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Definitions:

Retirement Fund

A financial arrangement designed to replace employment income upon retirement, commonly managed through savings or investment plans.

Retirement Goal

A financial target or savings plan aimed at ensuring financial security for an individual upon retirement.

Compounded Annually

This refers to the process where interest is calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan.

Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment's initial cost.