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Question
Union Atlantic Corporation, which has a required rate of return equal to 14 percent, is evaluating a capital budgeting project that has the following characteristics:
Year Cash Flows
0 $(170,000)
1 60,750
2 60,750
3 60,750
4 60,750
Union Atlantic's capital budgeting manager has determined that the project's net present value is $7,008. According to this information, which of the following statements is correct?
a. The project's internal rate of return (IRR) must be greater than 14 percent.
b. The project's discounted payback must be less that its economic life.
c. The project should be purchased by Union Atlantic.
d. All of these statements are correct.
e. None of these statements is correct.
Answer
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