Question
In: Finance
Compute the IRR static for Project E. The appropriate cost of capital is 8 percent. (Do...
Compute the IRR static for Project E. The appropriate cost of capital is 8 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.)
| Project E | ||||||
| Time: | 0 | 1 | 2 | 3 | 4 | 5 |
| Cash flow | –$2,700 | $830 | $840 | $760 | $540 | $340 |
Solutions
Expert Solution
IRR is the Rate at which PV of Cash inflows are equal to PV of Cash Outflows.
| Year | CF | PVf @8% | Disc CF | PVF @9% | Disc CF |
| 0 | $ -2,700.00 | 1.0000 | $ -2,700.00 | 1.0000 | $ -2,700.00 |
| 1 | $ 830.00 | 0.9259 | $ 768.52 | 0.9174 | $ 761.47 |
| 2 | $ 840.00 | 0.8573 | $ 720.16 | 0.8417 | $ 707.01 |
| 3 | $ 760.00 | 0.7938 | $ 603.31 | 0.7722 | $ 586.86 |
| 4 | $ 540.00 | 0.7350 | $ 396.92 | 0.7084 | $ 382.55 |
| 5 | $ 340.00 | 0.6806 | $ 231.40 | 0.6499 | $ 220.98 |
| NPV | $ 20.31 | $ -41.14 | |||
IRR = Rate at which least +ve NPV + [ NPV at that Rate / Change in NPV due to 1% inc in disc Rate ] * 1%
= 8% + [ 20.31 / 61.45 ] * 1%
= 8% + 0.33%
= 8.33%
jeff jeffy answered 2 months agoRelated Solutions
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calculations and round your final answer to 2 decimal
places.)
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Time:
0
1
2
3
4
5
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–$1,400
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Should the project be accepted or rejected?
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