Question

Simms Corp. 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 or negative, in both cases it will be rejected.
Year 0123
Cash flow -$1000 $425 $425 $425
a. 13.87%
b. 13.21%
c. 15.29%
d. 12.55%
e. 14.56%

Answer 1

Answer:

the project's IRR is b. 13.21%

Explanation:

The Internal Rate of Return (IRR) of a Project is interest rate that causes the the Present Values of the Project Cashflows to equal the price of the Initial Investment.

This can be calculated using a financial calculator as follows ;

-$1000         CFj

$425           CFj

$425           CFj

$425           CFj

Then Shift IRR/YR we get 13.2054 % that is 13.21%.