Ask Question
16 May, 17:16

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 5Cash flows - $1,250 $325 $325 $325 $325 $325a. 9.43%b. 9.91%c. 10.40%d. 10.92%e. 11.47%

+3
Answers (1)
  1. 16 May, 17:24
    0
    a. 9.43%

    Explanation:

    IRR is the rate of return that makes initial investment equal to present value of cash inflows

    Initial investment = Annuity*[1 - 1 / (1 + r) ^n] / r

    1250 = 325 * [1 - 1 / (1 + r) ^5] / r

    Using trial and error method, i. e., after trying various values for R, lets try R as 9.43%

    1250 = 325 * [1 - 1 / (1 + 0.0943) 5] / 0.0943

    1250 = 325 * 3.846639

    1250 = 1,250

    Therefore, The project IRR is 9.43%
Know the Answer?
Not Sure About the Answer?
Find an answer to your 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 ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers