Washington Industries Inc

question 74

Multiple Choice

Washington Industries Inc.is considering a project that has an initial after-tax outlay or after-tax cost of $350,000.The respective future cash inflows from its five-year project for years 1 through 5 are $75,000 each year.Washington expects an additional cash flow of $50,000 in the fifth year.The firm uses the IRR method and has a hurdle rate of 10%.Will Washington accept the project?

• A)Washington accepts the project because it has an IRR greater than 10%.
• B)Washington rejects the project because it has an IRR less than 10%.
• C)Washington accepts the project because it has an IRR greater than 5%.
• D)There is not enough information to answer this question.

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Definitions:

Shipping Costs

Expenses associated with transporting goods from one location to another.

Raw Material Costs

Expenses associated with acquiring the unprocessed materials needed to manufacture a product. These costs are a significant component of total production cost.

Total Cost Of Offshoring

The comprehensive calculation of all expenses related to relocating business operations abroad, including setup, operational, and labor costs.

Supply Chain Visibility

The ability of a company to track and understand the status of its products throughout the supply chain, from raw materials to final delivery.