Modern Refurbishing 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 (and even negative), in which case it will be rejected. Year 0 1 2 3 4Cash flows - $850 $300 $290 $280 $270a. 13.13%b. 14.44%c. 15.89%d. 17.48%e. 19.22%

Question

Yasmin Morrow

Business

15 July, 19:15

Modern Refurbishing 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 (and even negative), in which case it will be rejected. Year 0 1 2 3 4Cash flows - $850 $300 $290 $280 $270a. 13.13%b. 14.44%c. 15.89%d. 17.48%e. 19.22%

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Reed · Answer 1

a. 13.13%

Explanation:

Let irr be x%

At irr, present value of inflows = present value of outflows.

850 = 300/1.0x + 290/1.0x^2 + 280/1.0x^3 + 270/1.0x^4

x = IRR

= 13.13%

Therefore, The project's IRR is 13.13%