Your company has a project available with the following cash

Your company has a project available with the following cash flows: Cash Flow $80,200 21,950 25,900 31,700 26,450 20,700 ar 0 2 3 4 If the required return is 16 percent, should the project be accepted based on the IRR? O No, because the IRR is 17.45 percent O Yes, because the IRR is 18.17 percent. O Yes, because the IRR is 17.45 percent. O Yes, because the IRR is 18.90 percent. O No, because the IRR is 18.90 percent.

Solution

Cash Flows:
Year 0 = -$80,200
Year 1 = $21,950
Year 2 = $25,900
Year 3 = $31,700
Year 4 = $26,450
Year 5 = $20,700

Let IRR be i%

NPV = -$80,200 + $21,950/(1+i) + $25,900/(1+i)^2 + $31,700/(1+i)^3 + $26,450/(1+i)^4 + $20,700/(1+i)^5
0 = -$80,200 + $21,950/(1+i) + $25,900/(1+i)^2 + $31,700/(1+i)^3 + $26,450/(1+i)^4 + $20,700/(1+i)^5

Using financial calculator, i = 17.45%

The project should be accepted on the basis of IRR.
Yes, because the IRR is 17.45%