Rogue River,Inc

question 33

Multiple Choice

Rogue River,Inc.is considering a project that has an initial outlay or cost of $220,000.The respective future cash inflows from its four-year project for years 1 through 4 are: $50,000,$60,000,$70,000,and $80,000,respectively.Rogue River uses the internal rate of return method to evaluate projects.Will Rogue River accept the project if its hurdle rate is 10%?

• A)Rogue River will not accept this project because its IRR is about 9.70%.
• B)Rogue River will not accept this project because its IRR is about 8.70%.
• C)Rogue River will not accept this project because its IRR is about 6.50%.
• D)Rogue River will not accept this project because its IRR is about 4.60%.

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Definitions:

Prestige Pricing

A pricing strategy where prices are set higher than normal because the product or service is perceived to have a higher value or status symbol.

Odd Pricing

A pricing strategy that sets prices at odd numbers just below round numbers to make them appear smaller and more appealing to buyers.

Cost-Based Pricing

Formulas that calculate total costs per unit and then add markups to cover overhead costs and generate profits.