A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year 0 1 2 3 Cash Flow -$41,000 20,000 23,000 14,000 a. If the required return is 14 percent, what is the IRR for this project? b. Should the firm accept the project?

A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year 0 1 2 3 Cash Flow -$41,000 20,000 23,000 14,000 a. If the required return is 14 percent, what is the IRR for this project? b. Should the firm accept the project?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 7P

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Concept explainers

Cash Flow Statement Analysis

A company's cash flow is the movement of its cash inflows and cash outflows. A cash flow statement is prepared to determine changes in an organization's cash position. A cash flow statement shows how much money was generated and spent on the business during the fiscal year. The cash flow analysis is a method of analyzing an organization's investing, financing, and operating activities. A cash flow statement reveals an organization's liquidity and solvency, as well as its ability to change cash flows in the future. It eliminates the other effects of accounting methods by improving the comparability of different organizations' operational performance.

Question

4. A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows:
Year
0
1
2
3
Cash Flow
-$ 41,000
20,000
23,000
14,000
a.
If the required return is 14 percent, what is the IRR for this project?
b. Should the firm accept the project?

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