Suppose Your Firm Is Considering Investing in a Project with the Cash

question 16

Multiple Choice

Suppose your firm is considering investing in a project with the cash flows shown as follows,that the required rate of return on projects of this risk class is 8 percent,and that the maximum allowable payback and discounted payback statistic for the project are three and three and a half years,respectively.
Use the IRR decision rule to evaluate this project; should it be accepted or rejected?

• A)-4.95 percent, reject
• B)4.95 percent, accept
• C)-23.18 percent, reject
• D)23.18 percent, accept

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Definitions:

Revoke Acceptance

The right of a party to reject goods or services previously accepted, typically due to the discovery of defects or the nonconformity of the goods or services with contractual terms.

Nonconforming Goods

Products that fail to meet the quality, design specifications, or performance standards as outlined in a purchase contract.

Difficulty of Discovering

Refers to the challenges inherent in uncovering or identifying certain facts or truths, often used in legal contexts regarding the complexity of uncovering evidence.

Acceptance of Goods

The act by which a buyer indicates their agreement that the goods received from the seller conform to the contract specifications.