A firm evaluates all of its projects by applying the IRR rule. a. What is the project's IRR? (Do not round intermediate caluclations) b. If the required return is 15%, should the firm accpet the project? Please help me solve this in excel.
A firm evaluates all of its projects by applying the IRR rule. a. What is the project's IRR? (Do not round intermediate caluclations) b. If the required return is 15%, should the firm accpet the project? Please help me solve this in excel.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A firm evaluates all of its projects by applying the
a. What is the project's IRR? (Do not round intermediate caluclations)
b. If the required return is 15%, should the firm accpet the project?
Please help me solve this in excel.
![### Problem 8-5: Calculating IRR [LO 3]
A firm evaluates all of its projects by applying the IRR (Internal Rate of Return) rule.
The following table shows the yearly cash flows for a particular project:
| Year | Cash Flow |
|------|-------------|
| 0 | –$157,000 |
| 1 | $59,000 |
| 2 | $80,000 |
| 3 | $64,000 |
**a. What is the project's IRR?**
**Note:** Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
**b. If the required return is 15 percent, should the firm accept the project?**
The interactive fields are provided for the user inputs:
a. **Internal rate of return** | _____ %
b. **Project acceptance** | _____ (Yes/No)
For part **b**, the firm should decide whether to accept the project based on the comparison between the calculated IRR and the required return of 15 percent.
**Explanation of Concepts:**
- **Internal Rate of Return (IRR):** It is the rate of growth a project is expected to generate. It is used to evaluate the attractiveness of a project or investment.
The project will be accepted if the IRR is greater than or equal to the required return (in this case, 15%).
**Graph/Diagram (if applicable):**
There are no specific graphs or diagrams provided in this problem; the table of cash flows is the primary data source for calculations.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F483c3d17-1621-47af-bfd2-86acecf64938%2F6deedad4-ec18-4778-b18a-aa87e4a670ec%2Ftkhtm18_processed.png&w=3840&q=75)
Transcribed Image Text:### Problem 8-5: Calculating IRR [LO 3]
A firm evaluates all of its projects by applying the IRR (Internal Rate of Return) rule.
The following table shows the yearly cash flows for a particular project:
| Year | Cash Flow |
|------|-------------|
| 0 | –$157,000 |
| 1 | $59,000 |
| 2 | $80,000 |
| 3 | $64,000 |
**a. What is the project's IRR?**
**Note:** Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
**b. If the required return is 15 percent, should the firm accept the project?**
The interactive fields are provided for the user inputs:
a. **Internal rate of return** | _____ %
b. **Project acceptance** | _____ (Yes/No)
For part **b**, the firm should decide whether to accept the project based on the comparison between the calculated IRR and the required return of 15 percent.
**Explanation of Concepts:**
- **Internal Rate of Return (IRR):** It is the rate of growth a project is expected to generate. It is used to evaluate the attractiveness of a project or investment.
The project will be accepted if the IRR is greater than or equal to the required return (in this case, 15%).
**Graph/Diagram (if applicable):**
There are no specific graphs or diagrams provided in this problem; the table of cash flows is the primary data source for calculations.
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