Question

Following is information on two alternative investments being considered by Tiger Co. The company requires a 7% return from its investments. Project X1 $ (126,000) Project X2 Initial investment $ (212,000) Expected net cash flows in 94,500 84,500 Year 1 48,000 Year 2 58,500 83,500 74,500 Year 3 Compute the internal rate of return for each of the projects using Excel functions. Based on internal rate of return, indicate whether each project is acceptable. (Round your answers to 2 decimal places.) IRR Acceptable? Project X1 Project X2 % Yes % Yes

Answer 1

Internal Rate of Return Project X1 Project X2 investment Requires -126000 -212000 Cash Flows 1 48000 94500 58500 84500 83500 74500 IRR Excel Function =IRR(E7:E10) 9.92% IRR(values, (guess]) Answers IRR Acceptable Project X1 21.35% YES, Acceptable Project X2 9.92% YES, Acceptable IRR (From IRR funciton)