Question

Global Group is considering a project that has the following
cash flow and WACC data. What **is the project's
IRR**? State in percentage terms without the percent sign
symbol and round to the second decimal place. (Thus, 12.98756%
would be written as 12.99 to be correct)

WACC: 12.34%

After Tax Salvage Value at end of year 4 = $200

Year 0 1 2 3 4

Cash flows -$1,600 $450 $450 $450 $450

Answer #1

**IRR is the rate at which NPV is zero.**

**Lets compute NPV at 8% as shown below:**

= - $ 1,600 + $ 450 / 1.08 + $ 450 / 1.08^{2} + $ 450 /
1.08^{3} + $ 450 / 1.08^{4} + $ 200 /
1.08^{5}

**= $ 37.46304858**

**Lets compute NPV at 9% as shown below:**

= - $ 1,600 + $ 450 / 1.09 + $ 450 / 1.09^{2} + $ 450 /
1.09^{3} + $ 450 / 1.09^{4} + $ 200 /
1.09^{5}

**= - $ 0.441013113**

**It means the IRR lies between 8% and 9% since the
initial investment of $ 1,600 is recovered between them and same is
shown below:**

**= Lower rate + [ (Lower rate NPV / (Lower rate NPV -
Higher rate NPV) ] x (Higher rate - lower rate)**

= 8 + [ ($ 37.46304858) / ($ 37.46304858- (- $ 0.441013113) ] x (9 - 8)

**= 8.99% Approximately**

Feel free to ask in case of any query relating to this question

Global Group is considering a project that has the following
cash flow and WACC data. What is the project's
IRR? State in percentage terms without the percent sign
symbol and round to the second decimal place. (Thus, 12.98756%
would be written as 12.99 to be correct)
WACC: 12.34%
After Tax Salvage Value at end of year 4 =
$200
Year 0 1 2 3 4
Cash
flows
-$1,600 $450
$450
$450
$450

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operating working capital would be required. Revenues and other
operating costs are expected to be constant over the project's
5-year life. What is the project's IRR? Do not
round the intermediate calculations. State in...

Cookie Cutter Corp. is considering a new project whose data are
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operating working capital would be required. Revenues and other
operating costs are expected to be constant over the project's
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round the intermediate calculations. State in...

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shown below. The equipment that would be used has a 5-year tax
life, would be depreciated by the straight-line method over its
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operating working capital would be required. Revenues and other
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0
1
2
3
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Flag this Question
Question 123.13 pts
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