A company is considering a 5-year project. The company plans to invest $60,000 now and forecasts net cash flows for each year of $16,200. The company requires a hurdle rate of 12%. Calculate the internal rate of return (IRR) to determine whether the company should accept this project. Selected factors for the present value of an annuity of $1 for 5 years are shown below:

Interest Rate Present Value of an Annuity of $1 for 5 Years

10%..............................................................................3.7908

12%..............................................................................3.6048

14%..............................................................................3.4331

Select one or more:

a.

The project should be accepted.

b.

The project should be rejected because it earns less than 10%.

c.

The project earns more than 10% but less than 12%. At a hurdle rate of 12%, the project should be rejected.

d.

The project earns more than 14%, well over the hurdle rate of 12%. At a hurdle rate of 12%, the project should be accepted.

e.

Only 10% is acceptable.