Based solely on the internal rate of return rule

Assignment Help Financial Management

Reference no: EM131180290

A project has an initial cost of $68,300 and cash flows of $38,700, $102,300, and -$18,100 for Years 1 to 3, respectively. If the required rate of return for this investment is 8.7 percent, should you accept it based solely on the internal rate of return rule? Why or why not?

a. Yes; because the IRR exceeds the required return

b. Yes; because the IRR is a positive rate of return

c. You cannot apply the IRR rule in this case because there are multiple IRRs.

d. No; because the IRR is a negative rate of return

e. No; because the IRR is less than the required return

Reference no: EM131180290

Questions Cloud

What is the amount of cash that remains in the partnership : Richard plans to invest $100,000 for a 50 percent interest in a small business. His friend Jack will also invest $100,000 for the remaining 50 percent interest. On their investment, they expect to generate 10 percent before-tax return the first year...

What type of firms typically have economies of scale : Most managers and executives believe their firm has an opportunity to take advantage of economies of scale; however, many firms do not. Select one of the questions below and respond. How could you determine if your firm has economies of scale? What ..

Straight line be preferable to accelerated : What are the accounting and tax implications of using the MACR's accelerated cost recovery election for tax and other depreciation methods for financial accounting and reporting? What is the prospect of recapture on assets disposed before full cost r..

How much is left for your after all taxes are paid : You are a shareholder in a C corporation. The corporation earns $2.45 per share before taxes. On e is has paid taxes, it will distribute the rest of its earnings to you as a dividend. The corporate tax rate is 38%, and your personal tax rate on (both..

Based solely on the internal rate of return rule : A project has an initial cost of $68,300 and cash flows of $38,700, $102,300, and -$18,100 for Years 1 to 3, respectively. If the required rate of return for this investment is 8.7 percent, should you accept it based solely on the internal rate of re..

What is current stock price per share : Dave Inc. recently hired you as a consultant to handle project valuation. You have obtained the following information. The firm has 2 million shares of common stock outstanding. The common stock just paid a dividend of $1. It is expected to grow by 3..

What would the one-year maturity futures price : Suppose the value of the S&P 500 Stock Index is currently $1,350. If the one-year T-bill rate is 3.1% and the expected dividend yield on the S&P 500 is 2.2%. what should the one-year maturity futures price be? what would the one-year maturity futures..

What is the minimum total annual cost : A manufacturer is sourcing a component for a new product. Expected monthly demand is 705 units. The component can be purchased from either supplier A or supplier B, with the following price breaks: What order quantity is optimal if the objective is t..

Corporate social responsibility of the organization : Analyze the corporate social responsibility (CSR) of the organization relating Friedman's theories of CSR and evaluate the organizations' application of corporate social responsibility in relation to its stakeholders.

User Account

All Pages