A Project Has an Initial Cost of $68,300 and Cash

question 6

Multiple Choice

A project has an initial cost of $68,300 and cash flows of $38,700,$102,300,and -$18,100 for Years 1 to 3,respectively.If the required rate of return for this investment is 8.7 percent,should you accept it based solely on the internal rate of return rule? Why or why not?

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

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