Which of the following set of calculations must be erroneous if the required rate of return for all the projects is 10%?
A)Project C
B)Project B
C)Project D
D)Project A

Question

Which of the following set of calculations must be erroneous if the required rate of return for all the projects is 10%? 
A)Project C 
B)Project B 
C)Project D 
D)Project A

Quizplus · Accepted Answer

The set of calculations that must be erroneous if the required rate of return for all the projects is 10% is the one that provides a project with a negative net present value (NPV) at a discount rate of 10%. Project C has a NPV of -$2,062 at a discount rate of 10%, which means that the project's cash outflows are higher than its cash inflows at this required rate of return. Therefore, Project C is the best choice for this question, as it has an erroneous calculation. To check the accuracy of the calculations, we need to compare the present value of the cash inflows with the initial investment using the required rate of return of 10%. Only Project C has a present value of cash inflows lower than the initial investment, indicating an erroneous calculation. Projects A, B, and D have present values of cash inflows higher than the initial investment, suggesting accurate calculations.

Which of the Following Set of Calculations Must Be Erroneous