Question

Compute the IRR statistic for Project E. The appropriate cost of capital is 7 percent. (Do...

Compute the IRR statistic for Project E. The appropriate cost of capital is 7 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Project E
Time: 0 1 2 3 4 5
Cash flow −$2,800 $870 $870 $780 $560 $360
0 0
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Answer #1
Project E
IRR is the rate at which NPV =0
IRR 0.084223276
Year 0 1 2 3 4 5
Cash flow stream -2800 870 870 780 560 360
Discounting factor 1 1.084223 1.17554 1.274548 1.3818946 1.498282
Discounted cash flows project -2800 802.4177 740.0853 611.9817 405.24076 240.2752
NPV = Sum of discounted cash flows
NPV Project E = 0.000682761
Where
Discounting factor = (1 + IRR)^(Corresponding period in years)
Discounted Cashflow= Cash flow stream/discounting factor
IRR= 8.42%
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