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 rate Present value of an annuity of $1 factor for year 5

10% 3.7908

12% 3.6048

14% 3.4331

Multiple Choice

• The project should be accepted.
• The project should be rejected because it earns less than 10%.
• The project earns more than 10% but less than 12%. At a hurdle rate of 12%, the project should be rejected.
• Only 9% is acceptable.
• Only 10% is acceptable.