Question

23. You require a 14 percent rate of return from an investment. The investment costs $58,000 and will produce cash inflows of $25,000 for 3 years. Should you accept this project based on its internal rate of return? Why or why not?
A. No; because the IRR is 14.04 percent

B. Yes; because the IRR is 14.65 percent C. Yes; because the IRR is 14.67 percent D. No; because the IRR is 13.04 percent E. None of the above

24. A firm will pay a dividend per share of $2 in 1 year, $4.25 in 2
years, $6.00 in 3 years, and $6.25 in 4 years. You can sell the stock for $120 in 4 years. If you require a 9% return on your investment, how much would you be willing to pay
for a share of this stock today?
A. $75.45
B. $77.24
C. $81.52
D. $98.48
E. None of the above

Answer 1

23. IRR is 14.04%. IRR is greater than 14%. So, accept the project. Answer: None of the above.

24. Current price of the stock is $99.48. Answer: None of the above.

1 А B с 794 Year Amount 795 0 -$58,000 796 $25,000 797 2 $25,000 798 3 $25,000 799 IRR 14.04% 800 801 24 802 Year Amount PVF @ 9% Amount 803 1 2 0.917431193 1.834862385 804 4.25 0.841679993 3.577139971 805 3 6 0.77218348 4.63310088 806 4 6.25 0.708425211 4.427657569 807 4 120 0.708425211 85.01102533 808 Price willing to pay 99.48 N

Formulas: