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.
$$\begin{array}{l}
\begin{array} {| l | l | l | l | l | l | l |}
\hline\text {Time: }&0&1&2&3&4&5\
\hline\text {Cash flow:}&-1,000&-75&100&100&0&2,000\\hline
\end{array}
\end{array}$$
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.
$$\begin{array}{l}
\begin{array} {| l | l | l | l | l |  l |  l |}
\hline\text {Time: }&0&1&2&3&4&5\
\hline\text {Cash flow:}&-1,000&-75&100&100&0&2,000\\hline
\end{array}
\end{array}$$
A) 9 percent, accept
B) 9 percent, reject
C) 16.61 percent, accept
D) 16.61 percent, reject

Quizplus · Accepted Answer

The IRR (Internal Rate of Return) for Project X is calculated using the cash flow series provided. The IRR is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. In this case, the IRR exceeds the cost of capital of 9 percent, indicating that the project's return is higher than the minimum required return. Therefore, the firm should accept the project.

Compute the IRR for Project X and Note Whether the Firm