Question

an investment has the following cash flows. should the project be accepted if it has been assigned a required return of 14 percent? why or why not? no; the irr exceeds the required return by about 1.08 percent. no; the irr is less than the required return by about 0.97 percent. yes; the irr exceeds the required return by about 1.08 percent. yes; the irr is less than the required return by about 0.97 percent

Answer 1

The investment should not be accepted as the IRR is less than the required return.

Step-by-step explanation:

In order to determine whether the investment should be accepted, we need to compare the internal rate of return (IRR) with the required return. The IRR is the rate at which the present value of cash inflows equals the present value of cash outflows.

If the IRR exceeds the required return, it indicates that the investment is expected to earn a higher return than the minimum required. Conversely, if the IRR is less than the required return, it suggests that the investment is expected to earn a lower return than the minimum required.

Based on the given options, the correct answer is: no; the IRR is less than the required return by about 0.97 percent. This means that the investment is expected to generate a return lower than the required return.