e that your organization\'s chief financial officer (CFO) has just completed a p

Question

e that your organization's chief financial officer (CFO) has just completed a presentation to board of trustees concerning the analysis of a proposed ambulatory surgery center costing $2 million. During the presentation, the CFO indicated that the project had a net present value (NPV) of $786,339 and an internal rate of return (IRR) of 17.3 percent. Based on its risk, the project was judged to have a cost of capital of 13 percent. Which of the following statements is most correct? O A. The project is financially acceptable because its NPV is positive. O B. The project is financially acceptable because its IRR is greater than zero O C. The project is financially unacceptable because its NPV is less than the project's initial investment cost 0 D. The project is financially unacceptable because its IRR is greater than its cost of capital. O E. The project is financially unacceptable, but it may have sufficient social value to make it worthwhile Reset Selection hp

Explanation / Answer

A. The project is financially acceptable because its NPV is greater than Zero.

The NPV of the project is $786339 which is greater than zero and it has IRR of 17.3% which is higher than Cost of capital of 13% thus it is financially acceptable. A project should be accepted if the NPV > zero and IRR > cost of capital

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