q4

A company is looking at investing in Project A. They have determined that their cost of capital is 7.0% and the calculated NPV of the projected net cashflows at their cost of capital equals $58,000. You are also given that the only negative net cash flow occurs at time 0.

Which of the following statements is/are true?

(I) The internal rate of return (IRR) of the projected cashflows is more than 7%.

(II) The company should consider investing in Project A.

• A.

  I only

• B.

  Neither statement is true

• C.

  II only

• D.

  I and II