Compute the IRR for Project X and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 9 percent.

A)9 percent, accept
B)9 percent, reject
C)16.61 percent, accept
D)16.61 percent, reject

Question

Compute the IRR for Project X and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 9 percent.

A)9 percent, accept 
B)9 percent, reject 
C)16.61 percent, accept 
D)16.61 percent, reject

Quizplus · Accepted Answer

Using a financial calculator or Excel's IRR function, we can find that the IRR for the cash flows is approximately 16.61%. Since the IRR is greater than the cost of capital (9%), the project should be accepted.

Compute the IRR for Project X and Note Whether the Firm