Question

Maxwell Feed & Seed 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 4 5 Cash flows -$6,750 $2,000 $2,025 $2,050 $2,075 $2,100 a. 15.45% b. 13.74% c. 15.61% d. 17.17% e. 12.96%

Answer 1

Answer:

The correct option is c. 15.61%.

Explanation:

Note: See the attached excel file for the calculation of the IRR of this project.

Internal Rate of Return (IRR) can be described as a discount rate that makes the net present value (NPV) of a project to be equal to zero.

An IRR can be calculated using an excel function IRR. After inputting the data of the project to an excel sheet in the attached excel file, the IRR is calculated by simply typing the =IRR(B4:B9) in any cell of the sheet.

From the attached excel file, the IRR is obtained as 15.61%

Therefore, the correct option is c. 15.61%.

Download xlsx