Question: Technology Corp. is considering a $200,000 investment in a new marketing campaign which they anticipate will provide annual cash flows of $52,000 for the next 5 years. The firm has a 10% cost of capital. What should the analysis indicate to the firm's managers?
A. IRR between 9% and 10% - accept the project
B. IRR between 9% and 10% - reject the project
C. IRR between 10% and 11% - accept the project
D. Not enough information to determine Edit
Answer: initial out cash flow = - 200,000
cash inflow = 52000 per yr for 5 yr .
IRR = IRR(-200000, 52000,52000, 52000 , 52000 , 52000)
= 9.43% p.a.
B. IRR between 9% and 10% - reject the project(Ans.) Edit
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