Computation and capital budgeting decision based on IRR.
An investment has the following cash flows. Should the project be accepted if it has been assigned a required return of 9.5%? Why or why not?
|
Year
|
Cash flow
|
|
0
|
($24,000)
|
|
1
|
$8,000
|
|
2
|
$12,000
|
|
3
|
$9,000
|
A. yes; because the IRR exceeds the required return by about 0.39%
B. yes; because the IRR is less than the required return by about 3.9%
C. yes; because the IRR is positive
D. no; because the IRR exceeds the required return by about 3.9%
E. no; because the IRR is 9.89%