Answered: Calculate the IRR of the project to…

Business

Accounting

Calculate the IRR of the project to assess whether it should be undertaken.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

An organisation is considering a capital investment in new equipment .

• The estimateed cash flows are as follows:

• Year Cash flow

• $

•0 ( $240000)

•1 80000

•2 32000

•3 80000

•4 40000

•5 24000

•Calculate the IRR of the project to assess whether it should be undertaken.

Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.

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