A Firm Is Evaluating Two Independent Projects Utilizing the Internal

question 139

Multiple Choice

A firm is evaluating two independent projects utilizing the internal rate of return technique. Project X has an initial investment of $80,000 and cash inflows at the end of each of the next five years of $25,000. Project Z has an initial investment of $120,000 and cash inflows at the end of each of the next four years of $40,000. The firm should ________.

• A) accept both the projects because they have equal IRR
• B) accept Project Y because its IRR is higher than Project Z
• C) accept Project Z because its IRR is higher than Project X
• D) reject both the projects because they have negative IRR

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