Project Delta has the following cash flows:CF 0 -$1,000,000CF 1 $100,000CF 2 $500,000CF 3 $500,000CF 4 $30,000Calculate the project's IRR given a required rate of return of 22%.NPV @ r =22% = -$293,206 (rounded up)IRR = 5.24% (rounded up)
A)IRR = 22.00%
B)IRR = 5.24%
C)IRR = 10.56%
D)IRR = -5.24%

Question

Quizplus · Accepted Answer

To calculate the IRR, we need to find the discount rate that makes the NPV of the project equal to zero. Given the cash flows, we can calculate the NPV at a required rate of return of 22% as -$293,206. Since this NPV is negative, we know that the IRR must be smaller than 22%. By trial and error, we can determine that the IRR is approximately 5.24%. Therefore, the best choice is B, IRR = 5.24%.

Project Delta Has the Following Cash Flows:CF 0 -$1,000,000CF 1