A company is considering a 5-year project. The company plans to invest $60,000 now and it forecasts cash flows for each year of $16,200. The company requires a hurdle rate of 12%. Calculate the internal rate of return to determine whether it should accept this project. 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
A. Only 9% is acceptable.
B. The project earns more than 10% but less than 12%. At a hurdle rate of 12%, the project should be rejected.
C. Only 10% is acceptable.
D. The project should be rejected because it earns less than 10%.
E. The project should be accepted.
Answer: B
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