Boleyn Company Is Considering Two Projects -Refer to the Figure

question 12

Multiple Choice

Boleyn Company is considering two projects.
Present value of an annuity of $1 in arrears
$\begin{array}{lrr}&\text { Project } \mathrm{A}&\text { Project } \mathrm{B}\\\text { Initial investment } & \$ 100,000 & \$ 25,000 \\\text { Annual cash flows } & \$ 18,750 & \$ 8,580 \\\text { Life of the project } & 8 \text { years } & 4 \text { years } \\\text { Depreciation per year } & \$ 25,000 & \$ 6,250\end{array}$ $\begin{array}{|c|l|l|l|l|}\hline \text { Periods } & 8 \% & 10 \% & 12 \% & 14 \% \\\hline 1 & 0.926 & 0.909 & 0.893 & 0.877 \\\hline 2 & 1.783 & 1.736 & 1.690 & 1.647 \\\hline 3 & 2.577 & 2.487 & 2.402 & 2.322 \\\hline 4 & 3.312 & 3.170 & 3.037 & 2.914 \\\hline 5 & 3.993 & 3.791 & 3.605 & 4.433 \\\hline 6 & 4.623 & 4.355 & 4.111 & 3.889 \\\hline 7 & 5.206 & 4.868 & 4.564 & 4.288 \\\hline 8 & 5.747 & 5.335 & 4.968 & 4.639 \\\hline 9 & 6.247 & 5.759 & 5.328 & 4.946 \\\hline 10 & 6.710 & 6.145 & 5.650 & 5.216 \\\hline\end{array}$
-Refer to the Figure.Which of the two projects,A or B,has a higher internal rate of return?

• A)Project A with an IRR of 10%
• B)Project B with an IRR of 10%
• C)Project A with an IRR of 14%
• D)Project B with an IRR of 14%

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