Western Beef Exporters Is Considering a Project That Has an NPV

question 40

Multiple Choice

Western Beef Exporters is considering a project that has an NPV of $32,600, an IRR of 15.1 percent, and a payback period of 3.2 years. The required return is 14.5 percent and the required payback period is 3.0 years. Which one of the following statements correctly applies to this project?

• A) The net present value indicates accept while the internal rate of return indicates reject. 
• B) Payback indicates acceptance. 
• C) The payback decision rule could override the accept decision indicated by the net present value. 
• D) The payback rule will automatically be ignored since both the net present value and the internal rate of return indicate an accept decision. 
• E) The net present value decision rule is the only rule that matters when making the final decision. 

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Definitions:

Oral Contract

A verbal agreement between parties that is legally binding.

Statute of Frauds

A rule in law that mandates specific contract types must be written and signed to be legally binding.

Statute of Frauds

A legal principle that requires certain types of contracts to be in writing and signed by the party to be charged, to be enforceable.

Unilateral Contract

An agreement where only one party makes a promise to perform in exchange for an act by the other party, who is not legally obligated to act.