Question 7) Flynn, Inc. is considering a four-year project that has an initial outlay or c

7) Flynn, Inc. is considering a four-year project that has an initial outlay or cost of $80,000. The future cash inflows from its project are $40,000, $40,000, $30,000, and $30,000 for years 1, 2, 3 and 4, respectively. Flynn uses the internal rate of return method to evaluate projects. What is the approximate IRR for this project?

A) The IRR is less than 12%.

B) The IRR is between 12% and 20%.

C) The IRR is about 24.55%.

D) The IRR is about 28.89%.

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8) Lincoln Industries Inc. is considering a project that has an initial after-tax outlay or after-tax cost of $350,000. The respective future cash inflows from its five-year project for years 1 through 5 are $75,000 each year. Lincoln expects an additional cash flow of $50,000 in the fifth year. The firm uses the net present value method and has a discount rate of 10%. Will Lincoln accept the project?

A) Lincoln accepts the project because it has an IRR greater than 10%.

B) Lincoln rejects the project because it has an IRR less than 10%.

C) Lincoln accepts the project because it has an IRR greater than 5%.

D) There is not enough information to answer this question.

9) Geronimo, Inc. is considering a project that has an initial outlay or cost of $220,000. The respective future cash inflows from its four-year project for years 1 through 4 are: $50,000, $60,000, $70,000, and $80,000, respectively. Geronimo uses the internal rate of return method to evaluate projects. Will Geronimo accept the project if its hurdle rate is 10%?

A) Geronimo will not accept this project because its IRR is about 9.70%. B) Geronimo will not accept this project because its IRR is about 8.70%. C) Geronimo will not accept this project because its IRR is about 6.50%. D) Geronimo will not accept this project because its IRR is about 4.60%.

10) Lennon, Inc. is considering a five-year project that has an initial outlay or cost of $80,000. The respective future cash inflows from its project for years 1, 2, 3, 4 and 5 are: $15,000, $25,000, $35,000, $45,000, and $55,000. Lennon uses the internal rate of return method to evaluate projects. What is Lennon’s IRR?

A) The IRR is less than 22.50%. B) The IRR is about 24.16%. C) The IRR is about 26.16%. D) The IRR is over 26.50%.

11) Dice, Inc. is considering a very risky five-year project that has an initial outlay or cost of $70,000. The future cash inflows from its project for years 1, 2, 3, 4, and 5 are all the same at $35,000. Dice uses the internal rate of return method to evaluate projects. Will Dice accept the project if its hurdle rate is 41.00%?

A) Dice will probably reject this project because its IRR is about 39.74%, which is slightly below its hurdle rate.

B) Dice will probably accept this project because its IRR is about 41.04%, which is slightly above its hurdle rate.

C) Dice will accept this project because its IRR is about 41.50%. D) Dice will accept this project because its IRR is over 45.50%.

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