A project has an initial cash inflow of $95,500 and cash flows of -$48,700 in Year 1 and -$57,200 in Year 2.The discount rate is 9 percent.Should this project be accepted or rejected based on IRR? Why?
A)Accepted: because the IRR of 6.98 percent is less than the discount rate
B)Accepted: because the IRR of 8.21 percent is less than the discount rate
C)Accepted: because the IRR of 8.78 percent is less than the discount rate
D)Rejected: because the IRR of 8.21 percent is less than the discount rate
E)Rejected: because the IRR of 6.98 percent is less than the discount rate

Question

Quizplus · Accepted Answer

IRR = $95,500 + (-$48,700)/(1 + IRR)+ (-$57,200)/(1 + IRR)²IRR = 6.98%NPV = $95,500 - $48,700/1.09 - $57,200/1.09²NPV = $2,677.01Because this is a financing type project,the project should be accepted since the IRR of 6.98 percent is less than the discount rate of 9 percent.This is verified by the positive NPV at the 9 percent rate.

A Project Has an Initial Cash Inflow of $95,500 and Cash