Question

“Consider the following investment project:

n	Net Cash Flow
0	-$1000
1	$1400
2	-$100

The firm’s MARR is 12%. One i* is 32.45%. Showing all calculations, compute the other i*, find the project’s true IRR, and determine the acceptability of this project.”

Answer 1

		A
1	n	Net Cash Flow
2	0	($1,000)
3	1	$1,400
4	2	($100)
	IRR	32.45%	0%	IRR using Excel Formula=IRR(A1:A4,0%)
		-93.20%	5%	IRR using Excel Formula=IRR(A1:A4,5%)

The project's other IRR = -93.20%

The project's true IRR = 32.45%

		A
1	n	Net Cash Flow
2	0	($1,000)
3	1	$1,400
4	2	($100)
	NPV	141.78

Since NPV is positive Project is acceptable.

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