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Billabong Tech uses the internal rate of return​ (IRR) to select projects. Calculate the IRR for...

Billabong Tech uses the internal rate of return​ (IRR) to select projects. Calculate the IRR for each of the following projects and recommend the best project based on this measure. Project​ T-Shirt requires an initial investment of ​$16, 000 and generates cash inflows of ​$6,000 per year for 6 years. Project Board Shorts requires an initial investment of ​$30,667 and produces cash inflows of ​$11,000 per year for 7 years

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Expert Solution

Project T-shirt

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

  • Press the CF button.
  • CF0= -$16,000. 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 the project is 29.58%.

Project board shorts

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

  • Press the CF button.
  • CF0= -$30,667. 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 the project is 30.22%.

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

jeff jeffy answered 1 year ago
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