Question

Asked Jul 18, 2019

290 views

A firm evaluates all of its projects by applying the IRR rule. The required return for the following project is 21 percent. The IRR is _____ percent and the firm should ______ the project.

** Year ** **cash flow**

0 -$28,643

1 21,000

2 16,000

3 4,000

- 67 percent; reject
- 26 percent; accept
- 26 percent; reject
- 30 percent; accept
- 30 percent; reject

Step 1

**Calculation of IRR:**

**Using Excel Spreadsheet:**

Step 2

The IRR is **26%** (rounded to nearest) and the firm should **ACCEPT** the project. Because the IRR is higher than the required return of the pr...

Tagged in

Find answers to questions asked by student like you

Show more Q&A

Q: One year ago, your company purchased a machine used in manufacturing for $90,000. You have learned ...

A: Calculation of NPV of Replacement:To calculate the NPV of Replacement, follow the below steps:

Q: As the chief investment officer for a money management firm specializing in taxable individual inves...

A: Part (a)Expected Utility function = E(U) = ER - σ2 / Risk Tolerance FactorPlease see the table below...

Q: You borrowed $700 at 5% compounded quarterly. Yourpayments are $150 at the end of each year. How man...

A: We will adopt the following approach:It's a typical time value of money case, where we have to find ...

Q: If $1 million face amount of commercial paper(270 day paper) is sold for $982,500, what is the simpl...

A: Calculating the value of simple rate of interest paid on commercial paper. We have,Face value of com...

Q: Suppose you wish to invest in an annuity so that you will have $120,000 at some future date for your...

A: We invest $350 monthly at a interest rate of 5.85% per month in order to give the child $120,000 at ...

Q: Gunter Company has income of $200,000, earnings per share of $2.00, common equity of $2,000,000, and...

A: Given information can be summarized as:Net income = NI = $200,000earnings per share, EPS = $2.00Book...

Q: Phillips Equipment has 80,000 bonds outstanding that are selling at par. Bonds with similar characte...

A: Calculation of weights of three components: Excel spread sheet:Note: Assumed $1,000 as par value

Q: Texas Tools Inc. has $20 million in earnings, pays $2.75 million in interest to bondholders, and pay...

A: Calculating the value of common stockholder’s residual claims to earnings. We have,Out of the total ...

Q: Grill Works and More has 8 percent preferred stock outstanding that is currently selling for $49 a s...

A: Calculation of Cost of Preferred Stock: