Question

An investment costs $152,000 and has projected cash inflows of $71,800, $86,900, and −$11,200 for Years 1 to 3, respectively. If the required rate of return is 15.5 percent, should you accept the investment based solely on the internal rate of return rule? Why or why not?

A) Yes; The IRR exceeds the required return.

B) Yes; The IRR is less than the required return.

C) No; The IRR is less than the required return.

D) No; The IRR exceeds the required return.

E) You should not apply the IRR rule in this case.

Answer

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