A project has cash flows of -$152,000, $60,800, $62,300, and $75,000 for Years 0 to 3, respectively. The required rate of return is 13 percent. Based on the internal rate of return of ________ percent, you should ________ the project.
A) 14.67; accept
B) 13.96; accept
C) 14.67; reject
D) 17.91; reject
E) 18.46; reject

Question

A project has cash flows of -$152,000, $60,800, $62,300, and $75,000 for Years 0 to 3, respectively. The required rate of return is 13 percent. Based on the internal rate of return of ________ percent, you should ________ the project.
A) 14.67; accept 
B) 13.96; accept 
C) 14.67; reject 
D) 17.91; reject
E) 18.46; reject

Quizplus · Accepted Answer

Using IRR function on a financial calculator or Excel, we find that the internal rate of return of the project is 13.96%. Since the internal rate of return is greater than the required rate of return of 13%, we should accept the project. Therefore, the best choice is B.

A Project Has Cash Flows of -$152,000, $60,800, $62,300, and $75,000