Question

Compute the internal rate of return for the cash flows of the following two projects: (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Year	Project A			Project B
0	–$	14,300		–$	11,900
1		5,600			3,000
2		6,400			8,900
3		5,200			4,800

Answer 1

		Project A		Project B
Internal rate of return		9.95%		17.78%
Working:
			Cash	Flows
	Year		Project A		Project B
	0	(D7)	$       -14,300	(F7)	$       -11,900
	1	(D8)	$           5,600	(F8)	$           3,000
	2	(D9)	$           6,400	(F9)	$           8,900
	3	(D10)	$           5,200	(F10)	$           4,800
Internal rate of return			=irr(D7:D10)		=irr(F7:F10)
			9.95%		17.78%
Internal rate of return is the rate at which net present value is zero.