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296 correct answer a delaying the cash outflow for a

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318 305. Correct answer c. The approximate internal rate of return is 9%. A net present value of zero is approximately half way between \$460 and (\$440) and 9% is half way between 8% and 10%. 306. Correct answer c. An internal rate of return equates Foster’s cash flows to the initial investment as shown below. (\$6,000 x .877) + (\$6,000 x .769) + (\$8,000 x .675) + (\$8,000 x .592) = \$20,012 Initial cash outflow o f \$20,000 ≈ \$20,012 307. Correct answer d. Both the internal rate of return method and the net present value method utilize discounted flow techniques taking into consideration the time value of money. Payback and average rate of return do not consider the time value of money. 308. Correct answer d. Statements III and IV are correct. Since the company has no capital rationing, all projects with positive net present values will enhance the value of Molar. Projects with negative internal rates of return will cost more than they will return to the company and should be rejected.
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