Describing a project with initial cash outlay

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Reference no: EM1339191

Q1) The information below describes a project with an initial cash outlay of $10,000 and a required return of 12%.

After-tax cash inflow
Year 1 $6,000
Year 2 $2,000
Year 3 $2,000
Year 4 $2,000

i) Which of the following statements is correct?

a. The project should be accepted since its NPV is $353.87.
b. The project should be rejected since its NPV is -$353.87.
c. The project should be accepted since it has a payback of less than four years.
d. The project should be rejected since its NPV is -$23.91.

ii) This project:

a. has an IRR of 9.86%.
b. should be accepted based on the IRR criterion.
c. has an IRR of 12%.
d. both a and b.

Reference no: EM1339191

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