Question

Maxwell Feed & Seed is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected.

Year	0	1	2	3	4	5
Cash flows	-$6,750	$2,000	$2,025	$2,050	$2,075	$2,100

a. 15.61%

b. 17.17%

c. 13.74%

d. 12.96%

e. 15.45%

Answer 1

Year	Cash flows
0	-6750
1	2000
2	2025
3	2050
4	2,075
5	2100

Method 1: IRR Calculation using ba ii plus calculator

Input the following values in a ba ii plus calculator

CF0 = -6750

C01 = 2000, F01 = 1

C02 = 2025, F02 = 1

C03 = 2050, F03 = 1

C04 = 2075, F04 = 1

C05 = 2100, F05 = 1

IRR -> CPT [Press IRR and then press CPT]

we get, IRR = 15.6104758

IRR = 15.61%

Method 2: IRR calculation using Excel

We can calculate the IRR of a project using the IRR function in Excel as shown below:

=IRR(B2:B7) = 15.61%

IRR = 15.61%

Answer -> 15.61% (Option a)