Using the tables provided, calculate the IRR of two investments and select the best combination of answers. Present value of $1 to be received after N periods:
IRR Project A
IRR Project B

Question

Using the tables provided, calculate the IRR of two investments and select the best combination of answers.  Present value of $1 to be received after N periods:
 IRR Project A
IRR Project B

Quizplus · Accepted Answer

To find the IRR, we use the following formula:
PV = CF/(1+IRR)^N, where PV = present value, CF = cash flow, N = number of periods, and IRR = internal rate of return. 
For Project A, we have the following cash flows:
-500, 300, 300, 300, 300, 300
Using a financial calculator, we find that the IRR is approximately 9.47%.
For Project B, we have the following cash flows:
-600, 300, 300, 300, 300, 300, 300, 300, 300
Using a financial calculator, we find that the IRR is approximately 13.95%.
Therefore, the best choice is C, as Project A has an IRR of 9.47% and Project B has an IRR of 13.95%, making the combination of 9% and 14% the closest to the actual values.

Using the Tables Provided, Calculate the IRR of Two Investments