Question

Compute the IRR static for Project E. The appropriate cost of capital is 7 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	–$1,100	$390	$510	$540	$320	$120

IRR= _____%

Should the project be accepted or rejected?

Answer 1

IRR or internal rate of return is the rate at which the cash outflows equal present value of cash inflows.

IRR is calculated using the IRR function in excel, =IRR(values,guess) or =IRR(C3:C8,F3)

For values year 0 to year 5 values are taken and for guess number 7% is taken or any guess number can be taken.

Thus the answer is 24.28%

Since IRR is greater than the cost of capital, the project should be accepted.