Question

A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows:

   

Year	Cash Flow
0	–$	28,100
1		12,100
2		15,100
3		11,100

  

If the required return is 15 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Solution:
	IRR	17.45	%
	YES
	Projects should be accepted as its IRR is higher than required rate of return 15% of the project
Working Notes:
We can get exact by excel method like below
A	B	C
1	Year	Cash Flow
2	0	-28,100
3	1	12,100
4	2	15,100
5	3	11,100
		17.45%
	Using Excel formula	=IRR(C2:C5)
	=IRR(C2:C5)
	here in formula C is column in which all cash flows are entered.
	Number 2 & 5 shows that data from 2th row   to 5th row of column C is used for IRR calculation.
Please feel free to ask if anything about above solution in comment section of the question.