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8 March, 17:18

Pet World 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 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 Select one:

a. 2.08%

b. 2.31%

c. 2.57%

d. 2.82%

e. 3.10%

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  1. 8 March, 17:25
    0
    C) 2.57%

    Explanation:

    Pet World's net cash flows:

    Year Cash flow

    0 - $9,500

    1 $2,000

    2 $2,025

    3 $2,050

    4 $2,075

    5 $2,100

    In order to find the rate of return we can use an excel spreadsheet and the IRR function = IRR (values,[guess]) = IRR (-9500,2000,2025,2050,2075,2100)

    =IRR = 2.57%
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