Frazier Fudge Has a Project with an Initial Outlay of $40,000,followed

question 75

Multiple Choice

Frazier Fudge has a project with an initial outlay of $40,000,followed by three years of annual incremental cash flows of $35,000.At the end of the third year,equipment will be sold producing additional cash flow of $10,000.Assuming a discount rate of 10%,which of the following is the correct equation to solve for the IRR of the project?

• A)$40,000 = $35,000(1.12)¹ + $35,000(1.12)² + $45,000(1.12)³
• B)$40,000 = $35,000(1 + IRR)¹ + $35,000(1 + IRR)² + $45,000(1 + IRR)³
• C)$40,000 = $35,000/(1.12)^IRR + $35,000/(1.12)^IRR + $45,000/(1.12)^IRR
• D)$40,000 = $35,000/(1 + IRR)+ $35,000/(1.IRR)+ $45,000/(1 + IRR)

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Definitions:

Limited Partnership

A business organization that has at least one general partner, who assumes unlimited liability, and at least one limited partner, whose liability is limited to his or her investment in the business.