-An Investment Has the Following Cash Flows and a Required

question 55

Multiple Choice

-An investment has the following cash flows and a required return of 13 percent.Based on IRR,should this project be accepted? Why or why not?

• A) No;The IRR exceeds the required return by about 0.06 percent.
• B) No;The IRR is less than the required return by about 1.53 percent.
• C) Yes;The IRR exceeds the required return by about 0.06 percent.
• D) Yes;The IRR exceeds the required return by about 1.53 percent.
• E) Yes;The IRR is less than the required return by about 0.06 percent.

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Definitions:

Investment

A placement of capital in expectation of deriving income or profit.

Return on Investment

A measure used to evaluate the efficiency of an investment or to compare the efficiencies of several different investments.

Deferred Tax Liability

A tax obligation owed by an entity in the future due to temporary differences between the book value of assets and liabilities and their tax value.

Income Tax Expense

The expense reported on the income statement that represents the amount of income tax a company owes to governmental authorities.