Data Computer Systems is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the WACC (and even negative), in which case it will be rejected.
A) 9.70%
B) 10.78%
C) 11.98%
D) 13.31%
E) 14.64%

Question

Data Computer Systems is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the WACC (and even negative), in which case it will be rejected. 
A) 9.70% 
B) 10.78% 
C) 11.98% 
D) 13.31% 
E) 14.64%

Quizplus · Accepted Answer

To calculate the IRR, we need to find the discount rate that sets the present value of the cash inflows equal to the present value of the cash outflows. Using trial and error, we get an IRR of approximately 13.31%, which is greater than the WACC of 10%, so the project should be accepted.

Data Computer Systems Is Considering a Project That Has the Following