Use the Information for the Question(s)below

question 86

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.
-The IRR for Larry's three-movie deal offer is closest to:

• A)3.5%.
• B)1.6%.
• C)-3.5%.
• D)-1.6%.

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Definitions:

Lump Sum

A one-time transaction occurring at a specific moment, rather than several installments spread out.

Years

A period of time consisting of 365 days (or 366 in a leap year), used as a standard unit of time to compare the duration of events or the intervals between them.

Quoted Rate

The stated interest rate or financial charge on a loan or financial product.