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Use the following information for Questions 16 20. Please analyze the following project. All...

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Accounting

Use the following information for Questions 16 20.

Please analyze the following project. All cash flows are in millions, they are assumed to be after-tax and they occur evenly over each year. The client requires a 20% rate of return.

Year

Cash Flow

Discounted Cash Flows

0

-4,500

1

1,500

2

1,700

3

4,500

IRR

NPV

Q19.The IRRs for this Project is:

Multiple Choice

  • The Project IRR is 26.14%

  • The Project IRR is 22.56%

  • The Project IRR is 15.65%

  • The Project IRR is 27.52%

Q20.Based on your analysis, which one of the following statements is correct?

  • You should call in a consultant with more experience than yourself

  • You should accept this Project, since its NPV is positive

  • You should reject this Project, since its IRR greater than the hurdle rate of 20%.

  • You should accept the Project since the Payback is very short

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