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Hobart Corporation evaluates capital projects using a variety of performance screens; including a hurdle rate of 16%, payback period of 3 years or less, and an accounting rate of return of 20% or more. Management is completing review of a project on the basis of the following projections. Capital investment P200,000 Annual cash flows P  74,000 Straight-line depreciation 5 years Terminal value P20,000 The projected internal rate of return (IRR) is 20%. Which one of the following alternatives reflects the appropriate conclusions for the indicated evaluative measures? Group of answer choices IRR − Accept; Payback − Accept. IRR − Accept; Payback − Reject. IRR − Reject; Payback − Reject.

Hobart Corporation evaluates capital projects using a variety of performance screens; including a hurdle rate of 16%, payback period of 3 years or less, and an accounting rate of return of 20% or more. Management is completing review of a project on the basis of the following projections. Capital investment P200,000 Annual cash flows P  74,000 Straight-line depreciation 5 years Terminal value P20,000 The projected internal rate of return (IRR) is 20%. Which one of the following alternatives reflects the appropriate conclusions for the indicated evaluative measures? Group of answer choices IRR − Accept; Payback − Accept. IRR − Accept; Payback − Reject. IRR − Reject; Payback − Reject.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 22E
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Hobart Corporation evaluates capital projects using a variety of performance screens; including a hurdle rate of 16%, payback period of 3 years or less, and an accounting rate of return of 20% or more. Management is completing review of a project on the basis of the following projections.

Capital investment

P200,000

Annual cash flows

P  74,000

Straight-line depreciation

5 years

Terminal value

P20,000

The projected internal rate of return (IRR) is 20%. Which one of the following alternatives reflects the appropriate conclusions for the indicated evaluative measures?

Group of answer choices
IRR − Accept; Payback − Accept.
IRR − Accept; Payback − Reject.
IRR − Reject; Payback − Reject.
IRR − Reject; Payback − Accept.
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