Frazier Fudge Has a Project with an Initial Outlay of $40,000,followed

question 65

Multiple Choice

Frazier Fudge has a project with an initial outlay of $40,000,followed by three years of annual incremental cash flows of $35,000.At the end of the third year,equipment will be sold producing additional cash flow of $10,000.Assuming a discount rate of 10%,which of the following is the correct equation to solve for the IRR of the project?

• A)$40,000 = $35,000(1.12)1 + $35,000(1.12)2 + $45,000(1.12)3
• B)$40,000 = $35,000(1 + IRR)1 + $35,000(1 + IRR)2 + $45,000(1 + IRR)3
• C)$40,000 = $35,000/(1.12)IRR + $35,000/(1.12)IRR + $45,000/(1.12)IRR
• D)$40,000 = $35,000/(1 + IRR)+ $35,000/(1.IRR)+ $45,000/(1 + IRR)

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