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Problem 5-5 Calculating IRR Vital Silence, Inc., has a project with the following cash flows: Year...

Problem 5-5 Calculating IRR Vital Silence, Inc., has a project with the following cash flows: Year Cash Flow 0 –$ 28,900 1 12,900 2 15,900 3 11,900 The appropriate discount rate is 14 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.) Should the firm accept the project? Reject Accept

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Answer #1
Project
IRR is the rate at which NPV =0
IRR 0.195057925
Year 0 1 2 3
Cash flow stream -28900 12900 15900 11900
Discounting factor 1 1.195058 1.428163 1.706738
Discounted cash flows project -28900 10794.46 11133.18 6972.365
NPV = Sum of discounted cash flows
NPV Project = 6.85673E-07
Where
Discounting factor = (1 + IRR)^(Corresponding period in years)
Discounted Cashflow= Cash flow stream/discounting factor
IRR= 19.51%
Accept project as IRR is more than discount rate
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