Question
In: Finance
Sheridan, Inc., a resort management company, is refurbishing one of its hotels at a cost of...
Sheridan, Inc., a resort management company, is refurbishing one of its hotels at a cost of $7,156,793. Management expects that this will lead to additional cash flows of $1,650,000 for the next six years. What is the IRR of this project? If the appropriate cost of capital is 12 percent, should Sheridan go ahead with this project?
| The IRR of this project is enter the IRR of this project in percentages rounded to 2 decimal places % |
| The firm should select an option rejectaccept the project |
Solutions
Expert Solution
The IRR is the interest rate that makes the NPV of the project equal to zero. The IRR for this project is:
0 = -$7,156,793 + $1,650,000/(1 + IRR) + $1,650,000/(1 + IRR)^2 + $1,650,000/(1 + IRR)^3 + $1,650,000/(1 + IRR)^4 + $1,650,000/(1 + IRR)^5 + $1,650,000/(1 + IRR)^6
IRR = 10.14%
Reject the project
jeff jeffy answered 3 years agoRelated Solutions
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An
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Costs
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S40
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Common shares
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Retained earnings
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Rent revenue
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