Pet World 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 (and even negative), in which case it will be rejected. $$\begin{array} { l c c c c c c }
\text { Year } & 0 & 1 & 2 & 3 & 4 & 5 \
\hline \text { Cash flows } & - \$ 9,500 & \$ 2,000 & \$ 2,025 & \$ 2,050 & \$ 2,075 & \$ 2,100
\end{array}$$
A) 2.08%
B) 2.31%
C) 2.57%
D) 2.82%
E) 3.10%

Question

Pet World 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 (and even negative), in which case it will be rejected. $$\begin{array} { l c c c c c c } 
\text { Year } & 0 & 1 & 2 & 3 & 4 & 5 \
\hline  \text { Cash flows } & - \$ 9,500 & \$ 2,000 & \$ 2,025 & \$ 2,050 & \$ 2,075 & \$ 2,100
\end{array}$$
A) 2.08%
B) 2.31%
C) 2.57%
D) 2.82%
E) 3.10%

Quizplus · Accepted Answer

The IRR is the discount rate that makes the net present value (NPV) of the cash flows equal to zero. By calculating the IRR for the given cash flows, it is found to be approximately 2.57%.

Pet World Is Considering a Project That Has the Following