A project has an initial cash inflow of $40,800 and a cash outflow of $44,900 in Year 1.The discount rate is 10 percent.Should this project be accepted or rejected based on IRR? Why?
A)Accepted,because the IRR is less than the discount rate.
B)Rejected,because the IRR is less than the discount rate.
C)Accepted,because the IRR is greater than the discount rate.
D)Rejected,because the IRR is greater than the discount rate.
E)Accepted,because the IRR equals the discount rate.

Question

Quizplus · Accepted Answer

IRR = $40,800 + (-$44,900)/ (1 + IRR) IRR = 10.05% NPV = $40,800 + (-$44,900)/ 1.10 NPV = -$18.18 Because this is a financing-type project,the project should be rejected since the IRR of 10.05 percent is greater than the discount rate of 10 percent.This is verified by the negative NPV at the 10 percent discount rate.

A Project Has an Initial Cash Inflow of $40,800 and a Cash