Question

Uuesalon 1 of 5 Questions Check My Work O O eBool O Project L costs $56,312.34, its expected cash inflows are $12,000 per year for 10 years, and its WACC is 10%. What is the project's IRR? Round your answer to two decimal places. O

Answer 1

The costs of the project is :

= $56,312.34

So, the CF0 = ($56,312.34)

CF1 TO CF10 = $12,000

So, the IRR is : 16.8%

IRR can also be calculated as, since the IRR is the rate at which the NPV is zero,

($56,312.34) + $12,000/ (1 + IRR)^1 + $12,000/ (1 + IRR)^2 + ........... $12,000/ (1 + IRR)^10

So, the IRR is :

= 17% ( rounded off to two decimal places)

As , the IRR> WACC the project should be accepted.