Hart Corp Is Considering a Project That Has the Following Cash

question 75

Multiple Choice

Hart Corp. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the cost of capital or negative, in both cases it will be rejected.
$\begin{array}{l}\begin{array} { l } \text { Year } \\\text { Cash flows }\end{array}\begin{array} { c c c c } 0 & 1 & 2 & 3 \\\hline - \$ 1,000 & \$ 425 & \$ 425 & \$ 425\end{array}\end{array}$

• A) 12.55%
• B) 13.21%
• C) 13.87%
• D) 14.56%
• E) 15.29%

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Definitions:

Yield to Maturity

The total return anticipated on a bond if it is held until the maturity date, factoring in the current price, par value, coupon yield, and time to maturity.

Coupon Rate

Each year, the interest rate a bond yields, expressed in terms of the percentage of its face value.

Premium

A premium is the amount by which the price of a security or financial instrument exceeds its intrinsic or face value.

Indenture

A legal contract specifying the terms and conditions of a bond or loan, including interest rates, repayment schedule, and other obligations.