Question

A project has a cash flow of -$161,900, $70,800, $62,300, and $75,000 for years 0 to 3, respectively. The required rate of return is 13 percent. Based on the internal rate of return of

Answer 1

Answer:

IRR = 13.55%

Accept

Explanation:

Here is the complete question:

A project has a cash flow of -$161,900, $70,800, $62,300, and $75,000 for years 0 to 3, respectively. The required rate of return is 13 percent. Based on the internal rate of return of _____ percent for this project, you should _____ the project.

The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.

IRR can be calculated using a financial calculator:

Cash flow in year 0 = -$161,900

Cash flow in year 1 =$70,800

Cash flow in year 2 = $62,300

Cash flow in year 3 =$75,000

IRR = 13.55%

A project should be accepted if its IRR is greater than the internal rate of return. Because 13.55 is greater than 13 percent the project should be accepted.

To find the IRR using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.

I hope my answer helps you