The company is considering two projects. The initial investment in the Project A and B are $50,000 and $60,000 respectively. The Project A will generate annual cash flows of $26,000 for four years and the Project B will generate annual cash flows of $30,000 for four years. What must be the required rate of return, so that the company will be indifferent between these two projects? (A) The required rate of return must be 21.86%. (B) The required rate of return must be 37.42%. (C) The required rate of return must be 34.90%. (D) The required rate of return must be 31.39%.

The company is considering two projects. The initial investment in the Project A and B are $50,000 and $60,000 respectively. The Project A will generate annual cash flows of $26,000 for four years and the Project B will generate annual cash flows of $30,000 for four years. What must be the required rate of return, so that the company will be indifferent between these two projects? (A) The required rate of return must be 21.86%. (B) The required rate of return must be 37.42%. (C) The required rate of return must be 34.90%. (D) The required rate of return must be 31.39%.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...

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