An investment has the following cash flows.Should the project be accepted if it has been assigned a required return of 9.5%? Why or why not? $$\begin{array} { c c }
\underline{\text { Year }} & \underline{\text { Cash Flow }} \
0&-\$24,000\
1 & \$ 8,000 \
2 & \$ 12,000 \
3 & \$ 9,000
\end{array}$$
A)yes; because the IRR exceeds the required return by about 0.39%.
B)yes; because the IRR is less than the required return by about 3.9%.
C)yes; because the IRR is positive.
D)no; because the IRR exceeds the required return by about 3.9%.
E)no; because the IRR is 9.89%.

Question

An investment has the following cash flows.Should the project be accepted if it has been assigned a required return of 9.5%? Why or why not? $$\begin{array} { c c } 
 \underline{\text { Year }} & \underline{\text { Cash Flow }} \
0&-\$24,000\
1 & \$ 8,000 \
2 & \$ 12,000 \
3 & \$ 9,000
\end{array}$$
A)yes; because the IRR exceeds the required return by about 0.39%.
B)yes; because the IRR is less than the required return by about 3.9%.
C)yes; because the IRR is positive.
D)no; because the IRR exceeds the required return by about 3.9%.
E)no; because the IRR is 9.89%.

Quizplus · Accepted Answer

We can calculate the IRR (Internal Rate of Return) of the project using a financial calculator or Excel. The IRR for this project is approximately 9.89%. Since the IRR exceeds the required return of 9.5% by about 0.39%, the project should be accepted. A higher IRR means that the project is generating a higher return than the required return, making it a good investment.

An Investment Has the Following Cash Flows A)yes; Because the IRR Exceeds the Required Return by About