Compute the IRR static for Project I. The appropriate cost of capital is 8 percent. Project l...
Question:
Compute the IRR static for Project I. The appropriate cost of capital is 8 percent.
Project l
| Year | 0 | 1 | 2 | 3 | 4 |
| Cash flow | 2,100 | 920 | 810 | 850 | 520 |
Should the project be accepted or rejected?
Internal rate of return:
The internal rate of return (IRR) is a method under capital budgeting used to determine if a project is feasible or not. This method estimates the discount rate at which the project will have a zero NPV. IRR is based on the time value of money concept and it discounts the future cash flows to their present worth which should be equivalent to the cost. A project evaluated under this method is considered acceptable if the IRR > cost of capital.
Answer and Explanation: 1
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View this answerWe calculate IRR using the method of interpolation;
This requires us to use the trial and error process and choose two discount rates that yield a...
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Internal Rate of Return Method: Definition & Calculation
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Chapter 14 / Lesson 7
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Discover what the internal rate of return is. Learn its importance and uses. Review its formula and learn how to calculate it through the given examples.
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