Question: An investment has the following cash flows. Should the project be accepted if it has been assigned a required return of 9.5 percent? Why or why not?
|
Year
|
Cash flow
|
|
0
|
($24,000)
|
|
1
|
$8,000
|
|
2
|
$12,000
|
|
3
|
$9,000
|
[A] yes; because the IRR exceeds the required return by about 0.39 percent
[B] yes; because the IRR is less than the required return by about 3.9 percent
[C] yes; because the IRR is positive
[D] no; because the IRR exceeds the required return by about 3.9 percent
[E] no; because the IRR is 9.89 percent