Project Black Swan Requires an Initial Investment of $115,000

question 12

Multiple Choice

Project Black Swan requires an initial investment of $115,000. It has positive cash flows of $140,000 for each of the next two years. Because of major demolition and environmental clean-up costs, cash flow for the third and final year of the project is $(170,000) .

• A) All possible IRR's for this project are negative.
• B) It is not possible to compute an IRR for this project.
• C) This project might have more than one IRR, but only one MIRR.
• D) The project is unacceptable at any required rate of return. This project might have more than one IRR.

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Definitions:

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set.

Net Realizable Value

The estimated selling price of goods minus the costs of their sale or disposal.

Lower of Cost

An inventory valuation method requiring inventory to be recorded at the lower of its historical cost or current market value.

LIFO

Last In, First Out, an inventory valuation method where the most recently produced items are the first to be expensed.