A project has an initial cost of $51,900 and cash flows of $18,700,$56,500,and -$9,100 for Years 1 to 3,respectively.If the required rate of return for this investment is 17 percent,should you accept it based solely on the internal rate of return rule? Why or why not?
A)Yes,because the IRR exceeds the required return.
B)Yes,because the IRR is a positive rate of return.
C)You cannot apply the IRR rule in this case because there are multiple IRRs.
D)No,because the IRR is a negative rate of return.
E)No,because the IRR is less than the required return.

Question

Quizplus · Accepted Answer

Since the cash flow in Year 3 is a negative value,there are multiple IRRs.Thus,the IRR rule does not apply.

A Project Has an Initial Cost of $51,900 and Cash