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. $$\begin{array} { l l l l l l l }
\text { Time: } & 0 & 1 & 2 & 3 & 4 & 5 \
\text { Cash flow: } & - 1000 & - 75 & 100 & 100 & 0 & 2000
\end{array}$$
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. $$\begin{array} { l l l l l l l } 
\text { Time: } & 0 & 1 & 2 & 3 & 4 & 5 \
\text { Cash flow: } & - 1000 & - 75 & 100 & 100 & 0 & 2000
\end{array}$$
A)9 percent, accept
B)9 percent, reject
C)16.61 percent, accept
D)16.61 percent, reject

Quizplus · Accepted Answer

Using a financial calculator or Excel, we can find the IRR to be approximately 16.61%. Since the IRR is greater than the cost of capital (9%), the project should be accepted as it is expected to provide a return greater than the cost of the funds used to finance it. Therefore, the best choice is C.

Compute the IRR for Project X and Note Whether the Firm