Solely on the internal rate of return rule

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You are considering an investment with the following cash flows. If the required rate of return for this investment is 13.5%, should you accept it based solely on the internal rate of return rule? Why or why not?

Year

0

1

2

3

Cash flows

-$12,000

$5,500

$8,000

-$1,500

A. Yes; because the IRR exceeds the required return.

B. Yes; because the IRR is a positive rate of return.

C. No; because the IRR is less than the required return.

D. No; because the IRR is a negative rate of return.

E. You cannot apply the IRR rule in this case because there are multiple IRRs.

Reference no: EM131725604

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