Question

Marielle Machinery Works forecasts the following cash flows on a project under consideration. It uses the internal rate of return rule to accept or reject projects.

C0 C1 C2 C3 −

$ 10,200 0 + $ 7,700 + $ 8,700

Calculate the IRR. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

IRR % ?

Should this project be accepted if the required return is 14%?

Yes No

Answer #1

The cash flows are:

Cash flow (C0) in year 0=$10200

Cash flow (C1) in year 1=$0

Cash flow (C2) in year 2=+$7700

Cash flow (C3) in year 3=+$8700

Part 1:

Using excel, we determined the value of IRR=20.86%

As the initial investment is a cash outflow, we have taken it as
negative in excel.

Part 2:

Yes, the project should be accepted because the value of IRR (that
is 20.86%) is greater than the required return of 14%.

As per the IRR decision rule, if IRR>Required return, the
project should be accepted.

2. A company is considering a project that has the following
cash flows: C0 = -3,000, C1 = +900, C2 = +500, C3 = +1,100, and C4
= +1,900, with a risk-adjusted discount rate of 8%. A) Calculate
the Net Present Value (NPV), Internal Rate of Return (IRR),
Modified Internal Rate of Return (MIRR), and Profitability Index
(PI) of this project. B) If you were the manager of the firm, will
you accept or reject the project based on the...

Here are the cash flows for a project under consideration: C0 C1
C2 −$8,010 +$5,940 +$20,160 a. Calculate the project’s net present
value for discount rates of 0, 50%, and 100%. (Round your answers
to the nearest whole dollar.) b. What is the IRR of the project?
(Do not round intermediate calculations. Enter your answer as a
whole percent.)

Here are the cash flows for a project under consideration:
C0
C1
C2
−$7,020
+$4,860
+$18,360
a. Calculate the project’s net present value
for discount rates of 0, 50%, and 100%. (Round your answers
to the nearest whole dollar.)
b. What is the IRR of the project? (Do
not round intermediate calculations. Enter your answer as a whole
percent.)

Here are the the cash flows for two mutually exclusive
projects:
Project
C0
C1
C2
C3
A
-21,200
9,328
9,328
9,328
B
-21,200
0
0
28,620
what is the IRR of each project? (round answer to 2 decimal
places)

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Project
C0
C1
C2
C3
A
−$
22,200
+$
9,768
+$
9,768
+$
9,768
B
−
22,200
0
0
+
29,970
What is the IRR of each project? (Round your answers to
2 decimal places.)

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
–$
28,700
1
12,700
2
15,700
3
11,700
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.)
Should the firm accept the project?
Yes
No

You are offered the chance to participate in a project that
produces the following cash flows:
C0
C1
C2
+
$
6,500
+
$
4,750
−
$
14,000
The internal rate of return is 14.7%.
If the opportunity cost of capital is 14%, what is the net
present value of the project? (Negative amount should be
indicated by a minus sign. Do not round intermediate calculations.
Round your answer to 2 decimal places.)
Net present value
$
Will you accept...

A project has the following cash flows.
C0
C1
C2
C3
($770)
$290
$530
$236
Calculate an IRR for the project using an iterative technique.
(Hint: Start by guessing 17%.) Do not round intermediate
calculations. Round PVF values in intermediate calculations to four
decimal places. Round the answer to whole percentage.
%

2. A project has the following cash flows
C0
C1
C2
C3
($1000)
$300
$400
$600
What is the project’s payback period?
Year
0
1
2
3
Cash Flow
($1000)
$300
$400
$600
Cumulative
($1000)
($700)
($300)
300
a. Calculate the projects NPV at 10%.
b. Calculate the project’s PI at 10%.
c. Calculate an IRR for the project in question 2
How would you answer a,b, and c in excel? I am getting...

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