You Would Like to Invest in the Following Project Victoria, Your Boss, Insists That Only Projects That Can Return

question 72

Multiple Choice

You would like to invest in the following project. $$\begin{array} { c c } \underline{\text { Year }} &\underline{ \text { Cash Flow }} \\ 0 & - \$ 55,000 \\1 & \$ 30,000 \\2 & \$37,000 \\\end{array}$$ Victoria, your boss, insists that only projects that can return at least $1.10 in today's dollars for every $1 invested can be accepted.She also insists on applying a 10% discount rate to all cash flows.Based on these criteria, you should:

• A)accept the project because it returns almost $1.22 for every $1 invested.
• B)accept the project because it has a positive PI.
• C)accept the project because the NPV is $2,851.
• D)reject the project because the PI is 1.05.
• E)reject the project because the IRR exceeds 10%.

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