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

question 119

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 12 percent,and that the maximum allowable payback and discounted payback statistic for the project are two and two and a half years,respectively. Use the MIRR decision rule to evaluate this project; should it be accepted or rejected?

• A) 12.00 percent, reject
• B) 31.21 percent, accept
• C) 54.22 percent, accept
• D) 80.67 percent, accept

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Definitions:

Open-Book

A management approach where employees are given access to company financial information to encourage understanding of business operations and promote informed decision making.

Profits

The financial gain obtained when the revenues generated from business activities exceed the expenses, costs, and taxes needed to sustain the activity.

Decision Problem

A situation that requires a choice to be made among different alternatives.

Leader

An individual who guides or directs a group towards achieving a common goal by influencing or motivating their behavior.