Intrepid, Inc., is considering investing in three independent projects. The cost

Question

Intrepid, Inc., is considering investing in three independent projects. The costs and the cash flows are given in the following table. The appropriate cost of capital is 16.32 percent.

Year Project 1 Project 2 Project 3
0 $(267,178) $(322,386) $(493,559)
1 61,809 166,445 205,025
2 83,394 152,191 205,025
3 90,610 107,856 205,025
4 98,630 0 205,025

Compute the project IRRs. (Round answer to 2 decimal places, e.g. 15.25%.)
The IRR of project 1 is -? %, project 2 is -? %, and project 3 is -? %

Identify the projects that should be accepted.
Intrepid should accept which project(s) -?

1 and 3
none of the projects
1
2
1 and 2
3
2 and 3
all projects

Explanation / Answer

IRR for projects 2,3 are greater thatn expectedcost f capital ie 16.32%. Hence 2,3 should be accepted

Rate 16.32% Project 1 Project 2 Project 3 Formula Year Cash flow PV of cash flow Cash flow PV of cash flow Cash flow PV of cash flow Cash flow PV of Cash flow 0 -267178 -267178 -322386 -322386 -493559 -493559 A A/(1+r)^0 1 61809 53137.03576 166445 143092.3315 205025 176259.4567 B B/(1+r)^1 2 83394 61634.80386 152191 112481.2629 205025 151529.7942 C C/(1+r)^2 3 90610 57572.2165 107856 68530.06271 205025 130269.7681 D D/(1+r)^3 4 98630 53875.51803 0 0 205025 111992.5792 E E/(1+r)^4 IRR 8.93% 16.67% 23.93% r

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.