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Calculate IRR - Stone Sour, Inc., has a project with the following cash flows: The company...

Calculate IRR - Stone Sour, Inc., has a project with the following cash flows: The company evaluates all projects by applying the IRR rule. If the appropriate interest rate is 9 percent, should the company accept the project?

Year

Cash Flows ($)

0

-$20,000

1

8,500

2

10,200

3

6,200
Business   Finance   
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Answer #1
Project
IRR is the rate at which NPV =0
IRR 12.41%
Year 0 1 2 3
Cash flow stream -20000.000 8500.000 10200.000 6200.000
Discounting factor 1.000 1.124 1.264 1.420
Discounted cash flows project -20000.000 7561.872 8072.740 4365.388
NPV = Sum of discounted cash flows
NPV Project = 0.000
Where
Discounting factor = (1 + discount rate)^(Corresponding period in years)
Discounted Cashflow= Cash flow stream/discounting factor
IRR= 12.41%

Accept project as IRR is greater than 9%

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