Tressor Company is considering a 5-year project. The company plans to invest $90,000 now and it forecasts cash flows for each year of $27,000. The company requires that investments yield a discount rate of at least 14%. Selected factors for a present value of an annuity of $1 for five years are shown below:Interest ratePresent value of an annuityof $1 factor for year 510%3.790812%3.604814%3.4331 Calculate the internal rate of return to determine whether it should accept this project.
A. The project should be accepted because it will earn more than 14%.
B. The project should be accepted because it will earn more than 10%.
C. The project will earn more than 12% but less than 14%. At a hurdle rate of 14%, the project should be rejected.
D. The project should be rejected because it will not earn exactly 14%.
E. The project should be rejected because it will earn less than 14%.
Answer: A
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