Nichols Inc.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 cost of capital or negative, in both cases it will be rejected. $$\begin{array} { l c c c c c c }
\text { Year } & 0 & 1 & 2 & 3 & 4 & 5 \
\hline \text { Cash flows } & - \$ 1,250 & \$ 325 & \$ 325 & \$ 325 & \$ 325 & \$ 325
\end{array}$$
A) 9.43%
B) 9.91%
C) 10.40%
D) 10.92%
E) 11.47%

Question

Nichols Inc.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 cost of capital or negative, in both cases it will be rejected. $$\begin{array} { l c c c c c c } 
\text { Year } & 0 & 1 & 2 & 3 & 4 & 5 \
\hline  \text { Cash flows } & - \$ 1,250 & \$ 325 & \$ 325 & \$ 325 & \$ 325 & \$ 325
\end{array}$$
A) 9.43%
B) 9.91%
C) 10.40%
D) 10.92%
E) 11.47%

Quizplus · Accepted Answer

IRR is the discount rate that makes the NPV of a project equal to zero. In this case, the NPV is:-1,250 + 325/(1+IRR) + 325/(1+IRR)^2 + 325/(1+IRR)^3 + 325/(1+IRR)^4 + 325/(1+IRR)^5 = 0Solving for IRR using a financial calculator or spreadsheet, we get IRR = 9.43%.

Nichols Inc A) 943% B) 9

Nichols Inc A) 943%
B) 9