Question
Toxic Assets gets pre-paid to clean up toxic waste. The company is considering a new project, and the cash flow estimates are below. Based on
Toxic Assets gets pre-paid to clean up toxic waste. The company is considering a new project, and the cash flow estimates are below. Based on the project's NPV and IRR, should this project be accepted? Assume the required return is 9 percent.
Cash Flows
Year 1 $5,500
Year 2 -$5,900
Multiple Choice
Insufficient information is provided to make a decision based on IRR.
Incorrect Accept the project based on the IRR rule but reject based on NPV rule.
It is not possible to calculate the IRR.
The firm should be indifferent to either accepting or rejecting this project.
Reject the project based on IRR rule but accept based on NPV.
Reject the project based on both rules.
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