Your Company Is Considering a Project with the Following Cash

question 95

Multiple Choice

Your company is considering a project with the following cash flows: Initial outlay = $1,748.80
Cash flows Years 1-6 = $500
Compute the IRR on the project.

• A) 9%
• B) 11%
• C) 18%
• D) 24%

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Definitions:

Short Run

Refers to a period in economics where certain inputs or resources are fixed and cannot be changed, contrasting with the long run where all factors are variable.

Long Run

A period in which all factors of production and costs are variable, allowing for adjustment to changes in the market or economy.

Economic Profit

A calculation of profitability that takes into account both the direct costs and opportunity costs of pursuing a particular course of action.

Economies Of Scale

The situation when a firm’s average total cost of producing a product decreases in the long run as the firm increases the size of its plant (and, hence, its output).