A Firm Is Considering a Project Requiring an Investment of $27,000

question 20

Multiple Choice

A firm is considering a project requiring an investment of $27,000. The project would generate an annual cash flow of $6,296 for the next seven years. The company uses the straight-line method of depreciation with no mid-year convention. Ignore income taxes. The approximate internal rate of return for the project is

• A) 6%.
• B) 8%.
• C) 12%.
• D) 14%.

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Definitions:

Net Capital Outflow

The difference between a country's savings and its domestic investments, representing the amount of money that flows out of the country to invest abroad minus the amount of money that flows into the country from foreign investors.

Net Exports

The value of a country's total exports minus its total imports; a measure of a nation's foreign trade balance.

Net Capital Outflow

The financial discrepancy between home country residents' investments in foreign lands and foreign investors' stakes in domestic assets.

U.S. Net Capital Outflow

The difference between the purchase of foreign assets by residents of the United States and the purchase of U.S. assets by foreigners.