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Billabong Tech uses the internal rate of return​ (IRR) to select projects. Calculate the IRR for...

Billabong Tech uses the internal rate of return​ (IRR) to select projects. Calculate the IRR for each of the following projects and recommend the best project based on this measure. Project​ T-Shirt requires an initial investment of $18,167 and generates cash inflows of $8,500 per year for 55 years. Project Board Shorts requires an initial investment of $28,000 and produces cash inflows of $11,500 per year for 66 years.

The IRR of project​ T-Shirt is _____ (Round to two decimal​ places.)

The IRR of project Board Shorts is ____(Round to two decimal​ places.)

Based on the internal rate of​ return, which project should the firm​ choose

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Answer #1

The IRR would be

Project T Shirt = 46.79%

Project Shorts = 41.07%

Based on IRR, Project shorts would be choosen because it has higher IRR.

The calculations are shown in the pic below. PS Some rows have been hidden to show the complete excel sheet in the pic.

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