You Are Considering an Investment with the Following Cash Flows

question 96

Multiple Choice

You are considering an investment with the following cash flows.If the required rate of return for this investment is 13.5%, should you accept it based solely on the internal rate of return rule? Why or why not? $\begin{array}{ll}\underline{\text { Year }} & \underline{\text { Cash Flow} } \\0& -\$ 12,000 \\1 & \$ 5,500 \\2 & \$ 8,000 \\3 & -\$ 1,500\end{array}$

• A)Yes; because the IRR exceeds the required return.
• B)Yes; because the IRR is a positive rate of return.
• C)No; because the IRR is less than the required return.
• D)No; because the IRR is a negative rate of return.
• E)You can not apply the IRR rule in this case because there are multiple IRRs.

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