Your company is considering a project with the following cash flows: Initial outlay = $1,748.80
Cash flows Years 1-6 = $500
Compute the IRR on the project.
A) 9%
B) 11%
C) 18%
D) 24%

Question

Quizplus · Accepted Answer

To calculate the IRR, we need to solve for the discount rate that sets the net present value (NPV) of the cash flows equal to zero. Using a financial calculator or Excel, we can find that the IRR for this project is 18%. This is the discount rate at which the present value of the cash inflows equals the present value of the initial outlay. Since this IRR is higher than the company's required rate of return, the project is considered attractive and should be accepted.

Your Company Is Considering a Project with the Following Cash