A company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $100,000. The present value of the future cash flows at the company's desired rate of return is $100,000. The IRR on the project is 12%. Which of the following statements is true?
A) The project should not be accepted because the net present value is zero.
B) The desired rate of return used to calculate the present value of the future cash flows is less than 12%.
C) The desired rate of return used to calculate the present value of the future cash flows is more than 12%.
D) The desired rate of return used to calculate the present value of the future cash flows is equal to 12%.
D
You might also like to view...
Which type of decisions are automatic responses to routine and recurring situations?
A. programmed decisions B. majority rule decisions C. executive decisions D. nonprogrammed decisions
Your current assignment is to condense a 200-page government policy report on oil drilling in Alaska into a shorter report for Sierra Club members to read. What kind of informational report would you most likely write?
A) Trip report B) Summary C) Meeting minutes D) Progress report
Regression is a prediction based on time-series information.
Answer the following statement true (T) or false (F)
If an investment is not risky, the reward or the potential return will probably be ________.
A. around 20% B. high C. low D. around 15%