Question: Suppose you have the following initial outlay and…
Suppose you have the following initial outlay and free cash flow information on a potential investment project where upper management requires a payback period of 4 or fewer years (i.e. required payback period ≤ 3.99999 years) and that investors’ Required Rate of Return is 15%. Also, suppose that you will make project acceptance or rejection decisions for each problem independently of decisions made in other problems.
What is the project’s Internal Rate of Return (IRR)? Would you accept the project? Please select answer from below.
| Period | CF | ||||
| 0 | -100,000 | ||||
| 1 | 130,000 | ||||
| 2 | 50,000 | ||||
| 3 | 31,000 | ||||
| 4 | 34,000 | ||||
| 5 | 18,000 | ||||
| 6 | 16,000 | ||||
| 7 | 12,000 | ||||
| a. | 14.29%; No | ||||
| b. | 15.00%; Yes | ||||
| c. | 15.00%; No | ||||
| d. | 18.34%; Yes | ||||
