Nichols Inc. is considering a project that has the following cash flow data. Wha

Question

Nichols Inc. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the cost of capital or negative, in both cases it will be rejected.
Year 0 1 2 3 4 5 Cash flows $1,250 $325 $325 $325 $325 $325
Nichols Inc. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the cost of capital or negative, in both cases it will be rejected.
Year 0 1 2 3 4 5 Cash flows $1,250 $325 $325 $325 $325 $325
Nichols Inc. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the cost of capital or negative, in both cases it will be rejected.
Year 0 1 2 3 4 5 Cash flows $1,250 $325 $325 $325 $325 $325

Explanation / Answer

IRR of the Project = 5% + 4.4860 i.e 9.4860%

Particulars Year Cash Flows PVF @ 10% PV @ 10% PVF @ 5% PV @ 5% Cash Outflow 0 -1250               1.00    (1,250.00)            1.00     (1,250.00) Cash Inflows 1 325               0.91          295.45            0.95           309.52 Cash Inflows 2 325               0.83          268.60            0.91           294.78 Cash Inflows 3 325               0.75          244.18            0.86           280.75 Cash Inflows 4 325               0.68          221.98            0.82           267.38 Cash Inflows 5 325               0.62          201.80            0.78           254.65 Net Present Value          (17.99)           157.08

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