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?
$\begin{array}{|l|l|}
\hline \text { Year } & \text { Cash Flow } \
\hline 0 & -£ 24,000 \
\hline 1 & £ 8,000 \
\hline 2 & £ 12,000 \
\hline 3 & £ 9,000\
\hline
\end{array}$
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%.

Question

Quizplus · Accepted Answer

To determine whether to accept this investment, we need to calculate its internal rate of return (IRR), which is the discount rate that makes the present value of the investment's cash flows equal to zero. Using a financial calculator or spreadsheet, we can find that the IRR of this investment is 9.89%, which is greater than the required return of 9.5%. Therefore, the project should be accepted, and the best answer is A.

An Investment Has the Following Cash Flows A)yes; Because the IRR Exceeds the Required Return by About