Vital Silence, Inc., has a project with the following cash flows: Year Cash Flow 0...
| Vital Silence, Inc., has a project with the following cash flows: |
| Year | Cash Flow | ||
| 0 | –$ | 27,400 | |
| 1 | 11,400 | ||
| 2 | 14,400 | ||
| 3 | 10,400 | ||
|
The required return is 16 percent. What is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| IRR | % |
|
Should the firm accept the project? |
|
Homework Answers
Let irr be x%
At irr,present value of inflows=present value of outflows.
27,400=11,400/1.0x+14,400/1.0x^2+10,400/1.0x^3
Hence x=irr=15.53%(Approx).
Hence since irr is less than required return;project must be rejected.
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Vital Silence, Inc., has a project with the following cash
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