Question

You are considering the following three mutually exclusive projects. The required rate of return for all three projects is 14%.

Year A B C

0 $ (1,000) $(5,000) $(50,000)

1 $ 300 $ 1,700 $ 0

2 $300 $ 1,700 $15,000

3 $ 600 $1,700 $ 28,500

4 $300 $1,700 $ 33,000

What is the IRR of the best project? % terms to 2 decimal places w/o % sign

Answer 1

Using the BA 2 PLUS financial calculator we will find the IRR. Please press the following keys on your calculator-

CF

2ND CE|C

CFo = -1000

Down arrow

CO1 = 300

Down arrow (2)

CO2 = 300

Down arrow (2)

CO3 = 600

Down arrow (2)

CO4 = 300

IRR CPT

IRR = 17.49% (Project A)

Similarly IRR for project B and C will be-

IRR = 13.54% (Project B)

IRR = 14.23% (Project C)

IRR of the best project i.e. project A is 17.49%

Do let me know in the comment section in case of any doubt.