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Question
Tressor Company is considering a 5-year project. The company plans to invest $90,000 now and it forecasts cash flows for each year of $27,000. The company requires that investments yield a discount rate of at least 14%. Selected factors for a present value of an annuity of 1 for five years are shown below:Present value of an annuity
Interest rate of $1 factor for year 5
10% 3.7908
12% 3.6048
14% 3.4331
Calculate the internal rate of return to determine whether it should accept this project.
A.The project should be accepted because it will earn more than 14%.
B.The project should be accepted because it will earn more than 10%.
C.The project will earn more than 12% but less than 14%. At a hurdle rate of 14%, the project should be rejected.
D.The project should be rejected because it will earn less than 14%.
E.The project should be rejected because it will not earn exactly 14%.
Answer
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