Benson Corporation is considering an investment in equipment that would cost $50,000 and provide annual cash inflows of $14,000.The company's required rate of return is 12%; the internal rate of return for the investment is 10.5%.Should the company make this investment?

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the rate at which the net present value (NPV) of an investment is equal to zero. If the IRR is less than the company's required rate of return, it means that the investment is not expected to generate returns as high as what the company requires. In this case, the IRR is 10.5% while the required rate of return is 12%, indicating that the investment should not be made as it does not meet the company's required rate of return. Therefore, the best choice is C.

Benson Corporation Is Considering an Investment in Equipment That Would