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Afirm evaluates all of its project by applying the IRR rule. Calculate IRR of this project. If the required return is 15 perc
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Answer #1

Internal rate of return is calculated using a financial calculator by inputting the below:

  • •   Press the CF button.
  • •   CF0= -$190,500. It is entered with a negative sign since it is a cash outflow.
  • •   Cash flow for each year should be entered.
  • •   Press Enter and down arrow after inputting each cash flow.
  • •   After entering the last cash flow cash flow, press the IRR and CPT button to get the IRR of the project.

The IRR of project is 5.84%.

The firm should not accept the project as per the internal cost of capital rule since the internal cost of capital is less than the required return of 15%.

In case of any query, kindly comment on the solution.

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