Glossimer Thread Company Is Evaluating an Investment That Will Cost

question 151

Multiple Choice

Glossimer Thread Company is evaluating an investment that will cost $760,000 and will yield cash inflows of $255,000 in the first year,$325,000 in the second year,and $380,000 in the third and the final year.Use the table below and determine the internal rate of return.
Present value of $1:
$$\begin{array} { | r | c | c | c | c | c | } \hline & 8 \% & 9 \% & 10 \% & 11 \% & 12 \% \\\hline 1 & 0.926 & 0.917 & 0.909 & 0.901 & 0.893 \\\hline 2 & 0.857 & 0.842 & 0.826 & 0.812 & 0.797 \\\hline 3 & 0.794 & 0.772 & 0.751 & 0.731 & 0.712 \\\hline 4 & 0.735 & 0.708 & 0.683 & 0.659 & 0.636 \\\hline 5 & 0.681 & 0.65 & 0.621 & 0.593 & 0.567 \\\hline\end{array}$$ The IRR of the project will be ________.

• A)between 10% and 11%
• B)less than 11%
• C)less than 10%,more than 11%
• D)more than 11%

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Definitions:

Inventory Accounting Methods

Different approaches, such as FIFO (First In, First Out), LIFO (Last In, First Out), and weighted average cost, used to value and manage inventory.

Adjusting Entry

An adjusting entry is a journal entry made in accounting records to adjust income and expense accounts so they comply with the accrual concept.

Interest-Bearing Note

A debt instrument in which the issuer pays the holder interest at a specified rate over the term of the note.