Question

Compute the IRR static for Project E. The appropriate cost of capital is 7 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Time 0 1 2 3 4 5

Cash flow -$2800 $870 $870 $780 $560 $360

IRR ___ %

Answer 1

Internal rate of return is the rate at which if we discount all the future cash flows, the resulting NPV will be zero, it is minimum rate of return that management seeks from the project, IRR of te asset/project must be greater than the required rate of return, otherwise it will not be feasible for the management to accept the project. Best way to calculate IRR is using Excel.

Year	Cash flow
0	-2800
1	870
2	870
3	780
4	560
5	360
IRR	8.42%
Formula	=IRR(J21:J31)

IRR = 8.42%

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