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%

 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%

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