The Flour Baker is considering a project with the following cash flows.Should this project be accepted based on its internal rate of return if the required return is 18 percent? $$\begin{array} { | c | r | }
\hline \text { Year } & \text { Cash Flow } \
\hline 0 & - \$ 49,000 \
\hline 1 & 9,500 \
\hline 2 & 26,200 \
\hline 3 & 38,700 \
\hline
\end{array}$$
A)Yes; because the project's rate of return is 7.78 percent
B)Yes; because the project's rate of return is 16.08 percent
C)Yes; because the project's rate of return is 19.47 percent
D)No; because the project's rate of return is 19.47 percent
E)No; because the project's rate of return is 16.08 percent

Question

The Flour Baker is considering a project with the following cash flows.Should this project be accepted based on its internal rate of return if the required return is 18 percent? $$\begin{array} { | c | r | } 
\hline \text { Year } & \text { Cash Flow } \
\hline 0 & - \$ 49,000 \
\hline 1 & 9,500 \
\hline 2 & 26,200 \
\hline 3 & 38,700 \
\hline
\end{array}$$
A)Yes; because the project's rate of return is 7.78 percent
B)Yes; because the project's rate of return is 16.08 percent
C)Yes; because the project's rate of return is 19.47 percent
D)No; because the project's rate of return is 19.47 percent
E)No; because the project's rate of return is 16.08 percent

Quizplus · Accepted Answer

The project's internal rate of return (IRR) is 19.47 percent, which is higher than the required return of 18 percent, so the project should be accepted.

The Flour Baker Is Considering a Project with the Following