Question

Thorley Inc. 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 WACCor negative, in both cases it will be rejected.

Year 0 1 2 3 4 5

Cash flows -$1,250 $325 $325 $325 $325 $325

a. 9.43%
b. 9.91%
c. 10.40%
d. 10.92%
e. 11.47%

Answer 1

Computing the IRR of the project:

Step1: GO to excel and enter the cash flows from year-0 to year-5 in a column.

Step2: Select any cell beside the column and enter the formula as "=IRR(select cash flows from year-0 to year-5)"

Step3: Enter the formula as above and click "OK" to get the desired value.

Step4: Adjust the final value to "2" decimal points.

Therefore, the IRR of the project is 9.43%

The correct option is a) 9.43%

Answer 2

b