A Firm Is Evaluating Two Independent Projects Utilizing the Internal

question 9

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 a 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 if their cost of capital is 15% at the maximum.
• B) accept only Z if their cost of capital is 15% at the maximum.
• C) accept only X if their cost of capital is 15% at the maximum.
• D) reject both if their cost of capital is 12% at the maximum.

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