Maxwell Feed & Seed 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 WACC (and even negative), in which case it will be rejected.
A) 2.08%
B) 2.31%
C) 2.57%
D) 2.82%
E) 3.10%

Question

Maxwell Feed & Seed 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 WACC (and even negative), in which case it will be rejected. 
A) 2.08% 
B) 2.31% 
C) 2.57% 
D) 2.82% 
E) 3.10%

Quizplus · Accepted Answer

The project's cash flows show a negative cash flow in year 0 and positive cash flows thereafter. Using a financial calculator or Excel function, the IRR of these cash flows is 2.57%. This is greater than the company's WACC of 2%, so the project should be accepted.

Maxwell Feed & Seed Is Considering a Project That Has