A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows:
Year | Cash Flows |
0 | -$34,000 |
1 | $15,000 |
2 | $17,000 |
3 | $13,000 |
1) If the required return is 14 percent, what is the IRR for
this project?
2) Should the firm accept the project?
A) Reject
B) Accept
1) Excel function IRR can be used to find the IRR of the project.
IRR = 15.8047%
Formula in cell B6 =IRR(B2:B5)
2) Required return = 14%
IRR > Required return so the firm should accept the project.
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A firm evaluates all of its projects by applying the IRR rule. A project under consideration...
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