Glossimer Thread Company Is Evaluating an Investment That Will Cost

question 116

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:
$$\begin{array} { | c | c | c | c | c | c | } \hline & 8 \% & 9 \% & 10 \% & 11 \% & 12 \% \\\hline 1 & 0.926 & 0.917 & 0.909 & 0.901 & 0.893 \\\hline 2 & 0.857 & 0.842 & 0.826 & 0.812 & 0.797 \\\hline 3 & 0.794 & 0.772 & 0.751 & 0.731 & 0.712 \\\hline 4 & 0.735 & 0.708 & 0.683 & 0.659 & 0.636 \\\hline 5 & 0.681 & 0.65 & 0.621 & 0.593 & 0.567 \\\hline\end{array}$$ 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:

Independent Variable

A variable in an experiment or study that is manipulated or controlled by the researcher to observe its effect on the dependent variable.

Numerical Techniques

Computational algorithms used to solve mathematical problems, including equations, optimizations, and simulations.

Graphical Techniques

Methods used to analyze and visualize data through graphs and charts for better understanding.

Histograms

A graphical representation of data using bars of different heights to show the frequency of data in consecutive and non-overlapping intervals.