A proposed project has an initial cost of $38,000 and cash inflows of $12,300, $24,200, and $16,100 for Years 1 through 3, respectively. The required rate of return is 16.8 percent. Based on IRR, should this project be accepted? Why or why not?
A) No; The IRR exceeds the required return.
B) No; The IRR is less than the required return.
C) Yes; The IRR exceeds the required return.
D) Yes; The IRR equals the required return.
E) No; The IRR equals the required return.

Question

Quizplus · Accepted Answer

The IRR (Internal Rate of Return) is the rate at which the net present value of cash flows equals zero. If the IRR exceeds the required rate of return (16.8%), the project should be accepted.

A Proposed Project Has an Initial Cost of $38,000 and Cash