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Question(s) / Instruction(s):

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

Interest Rate                     Present Value of an Annuity of 1 factor

10%                                                        3.7908

12%                                                        3.6048

14%                                                        3.4331

 a)           The project should be accepted.

b)            The project should be rejected because it earns more than 10%.

c)            The project earns more than 10% but less than 12%. If the hurdle rate is 12%, the project should be rejected.

d)            Only 9% is acceptable.

e)            Only 10% is acceptable.

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