Answer:
Project t shirt IRR = 33.69%
Project board short IRR = 37.39%
I would recommend project board short because its IRR is higher.
Explanation:
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:
For Project T-Shirt ,
Cash flow in year 0 = -$17,333
Cash flow each year from year one to four = $8,500
IRR = 33.69%
Project Board Shorts,
Cash flow in year 0 = -$27,667
Cash flow each year from year one to five = $13,000
IRR = 37.39%
Project Board Shorts would be chosen because its IRR is higher than that of the other project.
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
