Question

A project has cash flows of -$148,400, $42,500, $82,300, and $46,200 for Years 0 to 3, respectively. The required rate of return is 10 percent. Based on the internal rate of return of the project percent for this project, you should Multiple Choice 7.48; reject 7.48; accept 7.91; accept 8.03; accept 8.03; reject

Answer 1

HI

Here the cash flows are

Y 0 =- $148,400

Y1 = $42,500

Y2 = $82,300

Y3 = $46,200

IRR=?

For internal rate of return (IRR) we will use excel IRR function

IRR =IRR(cash flows)

IRR = IRR(-148,400, 42,500, 82300,46,200)

IRR = 7.33%, hence you should reject the project since it is less than 10%

THanks