Strange Manufacturing Company Is Purchasing a Production Facility at a Cost

question 43

Multiple Choice

Strange Manufacturing Company is purchasing a production facility at a cost of $21 million. The firm expects the project to generate annual cash flows of $7 million over the next five years. Its cost of capital is 18 percent. What is the internal rate of return on this project? (Do not round intermediate computations. Round final answer to the nearest percent.)

• A) 17%
• B) 18%
• C) 19%
• D) 20%

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Definitions:

Economic Growth

The increase in the inflation-adjusted market value of the goods and services produced by an economy over time, often measured as the percentage increase in real gross domestic product (GDP).

Neoclassical School

An economic theory that emphasizes the role of supply and demand in determining the price and quantity of goods and services offered in a market, focusing on rational behavior and equilibrium.

Capitalism

An economic system where private individuals own and control trade and industry instead of the state.

Private Ownership

The legal right of a person or corporation to exclusively possess, control, and dispose of property or goods.