A bank is considering a project that consists of receiving a deposit of 100,000, paying...
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A bank is considering a project that consists of receiving a deposit of 100,000, paying interest at the end of each of the next five years at an effective annual rate of 4%, and paying back the principal at the end of the five-year period. The bank will incur expenses of 750 at time 0 and no other expenses. Which of the following is true of this project? There is no positive IRR, so the Net Present Value rule must be used. B The Net Present Value Rule does not apply because the cash flows start positive and end negative. There is more than one IRR, so it cannot be used to decide whether to do the project. D The Internal Rate of Return (IRR) is 4.17%, and the project should be taken on if the opportunity cost of capital is less than the IRR. The Internal Rate of Return (IRR) is 4.17%, and the project should be taken on if the opportunity cost of capital is greater than E
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