Question

Pet World is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the WACC (and even negative), in which case it will be rejected. Year 0 1 2 3 4 5 Cash flows -$9,500 $2,000 $2,025 $2,050 $2,075 $2,100 Select one:
a. 2.08%
b. 2.31%
c. 2.57%
d. 2.82%
e. 3.10%

Answer 1

Answer:

C) 2.57%

Explanation:

Pet World's net cash flows:

Year                    Cash flow

0                           -$9,500  

1                             $2,000

2                            $2,025

3                            $2,050

4                            $2,075

5                            $2,100

In order to find the rate of return we can use an excel spreadsheet and the IRR function =IRR (values,[guess]) =IRR (-9500,2000,2025,2050,2075,2100)

=IRR = 2.57%