Question

Datta Computer Systems is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected.
Year 0 1 2 3
Cash flows -$975 $450 $470 $490
a. 0.26%
b. 0.35%
c. 0.33%
d. 0.34%
e. 0.42%

Answer 1

Answer:

IRR is 20.64%

Explanation:

The internal rate of return is the rate of return on the project where the present of values of the  cash inflows over the three years equals the cash outflow in year zero.

It is simply a breakeven rate of return on investment project.

Using a spreadsheet approach,the formula for IRR is given below:

=IRR(values)

the values are the cash inflows and outflow in the relevant years.

IRR=20.64% as in the attached file

This shows that none of the five options is correct

Download xlsx