A Firm Is Evaluating Two Independent Projects Utilizing the Internal

question 100

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 the cost of capital is at most 15 percent.
• B) accept only Z if the cost of capital is at most 15 percent.
• C) accept only X if the cost of capital is at most 15 percent.
• D) none of the above

---

Definitions:

Tax-exempt

Not subject to tax by federal or local authorities, often applicable to certain income, property, or organizations.

Medical Expenses

Costs for healthcare services, treatments, prescriptions, and other medical needs that may be partially deductible on one's taxes.

Moving Expenses

Costs incurred for relocating for a new job or business location that were once deductible under certain conditions, but are now limited following recent tax law changes.

Old Residence

Refers generally to a taxpayer's previous home or dwelling before moving to a new location.