Question 3 – IRR [3 point]: Maxwell Feed & Seed is considering a project that ha

Question

Question 3 – IRR [3 point]: 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              -$9,500       $2,000        $2,025        $2,050        $2,075        $2,100

Show work/explain please!

Explanation / Answer

Let the IRR be x.

Now , Present Value of Cash Outflows=Present Value of Cash Inflows

9,500= 2,000/(1.0x)^1 + 2,025/ (1.0x)^2 + 2,050/ (1.0x)^3+2,075/ (1.0x)^4+2,100/ (1.0x)^5

Or x= 2.566%

Hence the IRR is 2.57%

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

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