Simkins Renovations Inc.is considering a project that has the following cash flow data.What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative),in which case it will be rejected. $\begin{array}{lccccc}
\text { Year } & 0 & 1 & 2 & 3 & 4 \
\hline \text { Cash flows } & -\$ 625 & \$ 300 & \$ 290 & \$ 280 & \$ 270
\end{array}$
?
A) 29.04%
B) 32.63%
C) 24.55%
D) 30.83%
E) 29.94%

Question

Quizplus · Accepted Answer

The Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. IRR can be found using financial calculators or spreadsheet software by inputting the cash flows and solving for the rate of return. Given the cash flows for Simkins Renovations Inc., the IRR is 29.94%. This is a calculation that typically requires the use of a financial calculator or software, as it involves solving for the rate that equates the present value of outflows and inflows.

Simkins Renovations Inc Year 01234 Cash flows −$625$300$290$280$270\begin{array}{lccccc}\text { Year } & 0 & 1 & 2 & 3 & 4 \\\hline \text { Cash flows } & -\$ 625 & \$ 300 & \$ 290 & \$ 280 & \$ 270\end{array} Year Cash flows ​0−$625​1$300​2$290​3$280​4$270​​

Simkins Renovations Inc $\begin{array}{lccccc}\text { Year } & 0 & 1 & 2 & 3 & 4 \\\hline \text { Cash flows } & -\$ 625 & \$ 300 & \$ 290 & \$ 280 & \$ 270\end{array}$