Compute the IRR static for Project E. The appropriate cost of capital is 7 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Project E | ||||||
Time: | 0 | 1 | 2 | 3 | 4 | 5 |
Cash flow | –$1,100 | $390 | $510 | $540 | $320 | $120 |
IRR= _____%
Should the project be accepted or rejected?
IRR or internal rate of return is the rate at which the cash outflows equal present value of cash inflows.
IRR is calculated using the IRR function in excel, =IRR(values,guess) or =IRR(C3:C8,F3)
For values year 0 to year 5 values are taken and for guess number 7% is taken or any guess number can be taken.
Thus the answer is 24.28%
Since IRR is greater than the cost of capital, the project should be accepted.
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