Question

Datta Computer Systems is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected.

Year	0	1	2	3
Cash flows	-$1,050	$450	$470	$490

a.	12.69%
b.	13.98%
c.	15.58%
d.	18.15%
e.	16.07%

7.         Is the investment in Question 6 a good investment?

1. Yes.
2. No.
3. It depends on the WACC.
4. We should calculate the MIRR and only then we can decide.
5. It depends on the Cross-Over Rate.

Answer 1

IRR is 16.07%

The answer to the second question is C) It depends on the WACC.