16. You are considering an investment for which you require a rate of return of 8.5 percent. The investment costs $67,400 and will produce cash inflows of $25,720 for three years. Should you accept this project based on its internal rate of return? Why or why not? A. Yes; because the IRR is 9.51 percent B. Yes; because the IRR is 7.08 percent C. Yes; because the IRR is 6.67 percent D. No; because the IRR is 7.08 percent E. No'; because the IRR is 9.51 percent 17. Woodcrafters requires an average accounting return (AAR) of at least 17.5 percent on all fixed asset purchases. Currently, it is considering some new equipment costing S169.700. This equipment will have a four-year life over which time it will be depreciated on a straight-line basis to a zero book value. The annual net income from this equipment is estimated at $7,100, $13,300, $18,600, and $19,200 for the four years. Should this purchase occur based on the accounting rate of return? Why or why not? A. Yes; because the AAR is less than 17.5 percent B. Yes; because the AAR is equal to 17.5 percent C. Yes; because the AAR is greater than 17.5 percent D. No; because the AAR is less than 17.5 percent E. No; because the AAR is greater than 17.5 percent 18. New Labs just announced that it has received a patent for a product that will eliminate all flu viruses. This news is totally unexpected and viewed as a major medical advancement. Which one of the following reactions to this announcement indicates the market for New Labs stock is efficient? A. The price of New Labs stock remains unchanged. B. The price of New Labs stock increases rapidly and then settles back to its pre-announcement level. C. The price of New Labs stock increases rapidly to a higher price and then remains at that price. D. All stocks quickly increase in value and then all but New Labs stock fall back to their original values. E. The value of all stocks suddenly increase and then level off at their higher values. 19. The standard deviation measures theof a security's returns over time. A. average value B. frequency C. volatility D. mean E. arithmetic average 20. Suppose a stock had an initial price of $36 per share, paid a dividend of $.42 per share during the year, and had an ending share price of $34. What was the capital gains yield? A. 6.72 percent B. 7.12 percent C. 3.78 percent D. -5.56 percent E. -4.94 percent