Question
Assume that your organization's chief financial officer (CFO) has just completed a presentation to the board of trustees concerning the analysis of a proposed ambulatory
Assume that your organization's chief financial officer (CFO) has just completed a presentation to the board of trustees concerning the analysis of a proposed ambulatory surgery center costing $2 million. During the presentation, the CFO indicated that the project had a net present value (NPV) of $786,339 and an internal rate of return (IRR) of 17.3 percent. On the basis of its risk, the project was judged to have a cost of capital of 13 percent. Which of the following statements is correct? There may be more that one answer but you need only choose one.
Select one:
a. The project is financially acceptable because its NPV is positive.
b. The project is financially acceptable because its IRR is greater than zero.
c. The project is financially unacceptable because its NPV is less than the project's initial investment costs.
d. The project is financially acceptable because its IRR is greater than its cost of capital.
e. The project is financially unacceptable, but it may have sufficient social value to make it worthwhile.
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