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Consider the following cash flows of a capital investment project A. The required rate of retum is 12% The payback cut-off set by the firm
Consider the following cash flows of a capital investment project A. The required rate of retum is 12% The payback cut-off set by the firm is 3.0 years. Use this information for the next 2 questions Year Project A Cash Flow ($) 0 -415.000 1 120,000 2 120.000 110.000 4 110.000 S 100.000 6 100.000 7 -100.000 Which of the following is true? a b C The firm should accept the project because the IRR is greater than 12% The firm should accept the project because the IRR is equal to 12% This project can not be evaluated. The firm should reject the project because the IRR is less than 12% The firm should not make a decision on the basis of IRR e a Which of the following is true of the above project? The firm should accept the project on the basis of payback period b The firm should reject the project on the basis of payback period The firm should accept the project on the basis of NPV d The firm should reject the project on the basis of NPV Oe Both b and d are correct
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