Compute the IRR statistic 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 10 percent.
A) 10 percent, accept
B) 10 percent, reject
C) 13.26 percent, accept
D) 13.26 percent, reject

Question

Compute the IRR statistic 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 10 percent. 
A) 10 percent, accept 
B) 10 percent, reject 
C) 13.26 percent, accept 
D) 13.26 percent, reject

Quizplus · Accepted Answer

To calculate the IRR, we need to solve for the discount rate that makes the net present value (NPV) of the cash flows equal to zero. Using a financial calculator or spreadsheet software, we can find that the IRR for Project X is 13.26 percent. Since this is greater than the required cost of capital of 10 percent, the project should be accepted.

Compute the IRR Statistic for Project X and Note Whether