Your required return is 15%. Should you accept a project with the following cash ﬂows?
A) No, because the IRR is 13.9%.
B) No, because the IRR is 14.7%.
C) Yes, because the IRR is 16.2%.
D) Yes, because the IRR is 17.2%.
E) Yes, because the IRR is 19.2%.

Question

Your required return is 15%. Should you accept a project with the following cash ﬂows? 
A) No, because the IRR is 13.9%. 
B) No, because the IRR is 14.7%. 
C) Yes, because the IRR is 16.2%. 
D) Yes, because the IRR is 17.2%. 
E) Yes, because the IRR is 19.2%.

Quizplus · Accepted Answer

The best way to evaluate a project is to compare its internal rate of return (IRR) to the required return. If the IRR is higher, then the project is acceptable. In this case, the IRR is 17.2%, which is higher than the required return of 15%. Therefore, the project should be accepted. Choices A, B, and C have lower IRRs, which would not meet the required return. Choice E has a higher IRR, but it is not necessary to exceed the required return by such a large margin to accept a project.

Your Required Return Is 15