Compute the IRR statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 9 percent.
Compute the IRR statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 9 percent.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 13P
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Compute the IRR statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 9 percent.
Year | 0 | 1 | 2 | 3 | 4 | 5 |
---|---|---|---|---|---|---|
Cash flows | -1000 | -75 | 100 | 100 | 0 | 2000 |
a) 9 percent, accept
b) 9 percent, reject
c) 16.61 percent, reject
d) 161.61 percent, accept
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