Question

Maxwell Feed & Seed is considering a project that has the following cash flow data. What...

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%

Homework Answers

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)

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