Question

27-

Blinding Light Co. has a project available with the following cash flows:

Year	Cash Flow
0	?$35,710
1	7,850
2	9,410
3	13,280
4	15,450
5	10,100

What is the project's IRR?

15.89%

16.55%

17.65%

14.30%

17.21%

Answer 1

IRR is the discount rate at which the present value of cash inflows is equal to the present value of cash outflow. Thus, at IRR Net present value of a project is zero. IRR can be calculated by hit and trial method or, by using the function IRR in excel The given information is used to calculate IRR of the project as follows:

1 Year Cash flovw 35710 7850 9410 13280 15450 10100 8 Calculate IRR using IRR function as follows: 9IRR IRR(B2:B7)

The results obtained are as follows:

Cash flow 0-$35,710.00 1 $7,850.00 2 $9,410.00 3 $13,280.00 4 $15,450.00 5 $10,100.00 1 Year 4 8 9 Calculate IRR using IRR function as follows: IRR 15.89%