Question

Week 4 Homework Assignment i Saved Compute the IRR statistic for Project E. The appropriate cost of capital is 9 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) 2.16 points Project E Time: Cash flow 0 1 -$1,500 $550 2 $630 3 $620 4 $400 5 $200 Skipped IRR % eBook Print References Should the project be accepted or rejected? O accepted O rejected

Answer 1

The solution for the first question is as follows:

IRR is the rate of return that we will get from the project. At i RR, Present Value of In flows are always equal to Owflow Decision Rule : IRR > Required Rate of Return > Accept the Project IRR - Required Rate of Returen > Indifferent IRR (Required Rate of Referens heject the Project Now, Intlow Discounting Value Discounting, Value Using Trial and Error Melhod, Las how be lting Present 21.1. Year () (1) factory anex 2 factor 1 550 0.8403 462.165 0.8264 2 630 0.7062 444.906 0.6830 620 0.5934/367.908 0.5645 4 400 0.4987.199.48 0.4665 5 200 0.4190 83.8 0.3855 1558.259 -Yamin ho Present valores (143) 454.52 430.29 349.99 18666 77.1 1498.5

19% = 1558.259 - 21% - 1490 1500 H-19 21-19 1500 - 1558.259 1498.5-1558.259 2-19 7 58.259 2 + 59.759 i 2 = 20.9498% X= 20.959% :: IRR = 20.951. (vounded off to two nearest decimol plcer) Now , 20.95% > 9:11 lie. IRR y Required Raley Retieren cie. Cost of capital) Soo the project should be accepted.