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A project has cash flows of –$148,400, $42,500, $87,300, and $43,200 for Years 0 to 3, respectively. The required rate of return is 11%. Based on the internal rate of return of ________ percent for this project, you should ________ the project.

Respuesta :

Answer:

New irr = 8.03%(Approx)

Project should be rejected

Explanation:

Given:

Initial value = $148,400

Cash flows;

$42,500

$87,300

$43,200

Internal rate of return = 11%

Computation:

present value = Present value of outflows

148,400 = 42,500/(1+x) + 87,300/(1+x)² + 43,200/(1+x)³  

So,

New irr = 8.03%(Approx)

New irr < Internal rate of return

So,

Project should be rejected

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