Ask Question
21 April, 17:14

Soft and Cuddly is considering a new toy that will produce the following cash flows. Should the company produce this toy based on IRR if the firm requires a rate of return of 17.5 percent?

Year 0: CF = - 132.,000

Year 1: CF = 97,000

Year 2: CF = 42,000

Year 3: CF = 28,000

A) Yes, because the project's rate of return is 16.45 percent

B) Yes, because the project's rate of return is 11.47 percent

C) No, because the project's rate of return is 16.45 percent

D) No, because the project's rate of return is 11.47 percent

E) No, because the internal rate of return is zero percent

+2
Answers (1)
  1. 21 April, 17:21
    0
    C) No, because the project's rate of return is 16.45 percent

    Explanation:

    Year 0: CF = - 132.,000

    Year 1: CF = 97,000

    Year 2: CF = 42,000

    Year 3: CF = 28,000

    using an excel spreadsheet we can calculate the project's IRR = 16.45%

    the company established as a rule that it will only accept projects whose IRR is higher than 17%, but since this project's IRR is lower (16.45%), then it should be rejected.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Soft and Cuddly is considering a new toy that will produce the following cash flows. Should the company produce this toy based on IRR if ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers