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 $ 11,800 9,400 4,600 2,500 5,400 6,900 3 4,200 3,800 1 WN Project A Project B Internal rate of return 1% 1%

Answer 1

IRR of a project can be calculated on financial calculator using following values:

For project A,

Press CF, put

CF0 = -11800

C01 = 4600

F01 = 1

C02 = 5400

F02 = 1

C03 = 4200

F03 = 1

press enter and then press IRR and press compute.

We get IRR = 10%

Similarly for Project B,

Press CF, put

CF0 = -9400

C01 = 2500

F01 = 1

C02 = 6900

F02 = 1

C03 = 3800

F03 = 1

press enter and then press IRR and press compute.

We get IRR = 17.92%