A project has an initial cost of $68,300 and cash flows of $38,700,$102,300,and -$18,100 for Years 1 to 3,respectively.If the required rate of return for this investment is 8.7 percent,should you accept it based solely on the internal rate of return rule? Why or why not?
A)Yes;because the IRR exceeds the required return
B)Yes;because the IRR is a positive rate of return
C)You cannot apply the IRR rule in this case because there are multiple IRRs.
D)No;because the IRR is a negative rate of return
E)No;because the IRR is less than the required return

Question

Quizplus · Accepted Answer

Since the cash flow in Year 3 is a negative value,there are multiple IRRs.Thus,the IRR rule does not apply.

A Project Has an Initial Cost of $68,300 and Cash