Question

Maxwell Feed & Seed is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected. Year 0 1 2 3 4 5 Cash flows −$9,500 $2,000 $2,025 $2,050 $2,075 $2,100 a. 2.31% b. 2.82% c. 3.10% d. 2.08% e. 2.57%

Answer #1

IRR = Lower rate + (NPV(L)/NPV(L)-NPV(H)) * (higher rate - lower rate)

Here let lower rate = 2% and higher rate = 3%

Year | Cash flow | PVF @ 2% | PV |

0 | -9500 | 1 | -9500 |

1 | 2000 | 0.9803922 | 1960.78 |

2 | 2025 | 0.9611688 | 1946.37 |

3 | 2050 | 0.9423223 | 1931.76 |

4 | 2075 | 0.9238454 | 1916.98 |

5 | 2100 | 0.9057308 | 1902.03 |

NPV | 157.93 |

Year | Cash flow | PVF @ 3% | PV |

0 | -9500 | 1 | -9500 |

1 | 2000 | 0.970873786 | 1941.75 |

2 | 2025 | 0.942595909 | 1908.76 |

3 | 2050 | 0.915141659 | 1876.04 |

4 | 2075 | 0.888487048 | 1843.61 |

5 | 2100 | 0.862608784 | 1811.48 |

NPV | -118.37 |

So IRR = 2% + 157.93 / (157.93-(-118.37)) * (*3-2) =
**2.57%**

**OPTION E : 2.57%**

Maxwell Feed & Seed is considering a project that has the
following cash flow data. What is the project's IRR? Note that a
project's projected IRR can be less than the WACC (and even
negative), in which case it will be rejected.
Year
0
1
2
3
4
5
Cash flows
-$6,750
$2,000
$2,025
$2,050
$2,075
$2,100
a. 13.74%
b. 12.96%
c. 15.45%
d. 17.17%
e. 15.61%

Maxwell Feed & Seed is considering a project that has the
following cash flow data. What is the project's IRR? Note that a
project's projected IRR can be less than the WACC (and even
negative), in which case it will be rejected.
Year
0
1
2
3
4
5
Cash flows
-$6,750
$2,000
$2,025
$2,050
$2,075
$2,100
a. 15.61%
b. 17.17%
c. 13.74%
d. 12.96%
e. 15.45%

Maxwell Feed & Seed is considering a project that has the
following cash flow data. What is the project's IRR? Note that a
project's projected IRR can be less than the WACC (and even
negative), in which case it will be rejected.
Year
0
1
2
3
4
5
Cash flows
-$6,750
$2,000
$2,025
$2,050
$2,075
$2,100
a. 15.61%
b. 17.17%
c. 12.96%
d. 15.45%
e. 13.74%

Boca Center Inc. is considering a project that has the following
cash flow and WACC data. What is the project's NPV? Note that a
project's expected NPV can be negative, in which case it will be
rejected.
WACC:
14.00%
Year
0
1
2
3
4
Cash flows
-$1,200
$400
$425
$450
$475
Group of answer choices
62.88
41.25
45.84
50.93
56.59
103.95
110.02
36.65
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Question 123.13 pts
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