You want to determine the internal rate of return of a project that generates non-equal cash flows over its life. By trial and error, you find that a discount rate of 14% yields a negative net present value, but a discount rate of 10% yields a positive net present value. The true rate of return must be:

a) Greater than 14% or less than 10%

b) less than 14% but greater than 10%

c) greater than 14%

d) cannot be determined from the given information

A company estimates it can save $1,400 per year in cash operating costs for the next 10 years if it buys a special-purpose machine at a cost of $5,500. No salvage value is expected. The company's minimum rate of return is 14%.

a) The investment is acceptable because the NPV is positive

b) The investment should be rejected because the NPV is negative

c) The project is acceptable because the IRR is less than the cost of capital rate

d) The project should be rejected based on its IRR

Refer to the above question. The NPV is

a) $5,500

b) $7,300

c) $1,802

d) ($1,802)

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Answer to the 1 question is option b)less than 14% and greater than 10% Aswer to the second... View the full answer

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Answer b) less than 14% but greater than... View the full answer