| Marielle Machinery Works forecasts the following cash flows on a project under consideration. It uses the internal rate of return rule to accept or reject projects. |
| C0 | C1 | C2 | C3 | |||||||||||||
| − | $ | 11,700 | 0 | $ | 9,200 | $ | 10,200 | |||||||||
| Calculate the IRR. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) |
| IRR _____ % |
| Should this project be accepted if the required return is 13%? | ||||
|
We have been provided with the information as follow
| Cash Flow |
|
| C0 | -11700 |
| C1 | 9200 |
| C2 | 10200 |
IRR
0 = -11700 +9200/(1+r)1 + 10,200/ (1+r)2
Now we solve the equation by trail and error method
IRR = 40.62%
2
Should this project be accepted if the required return is 13%?
Answer: NO because given return is lower then 40.62%
