Thompson Stores 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. Year: 0 1 2 3 4 5
Cash flows: -$1,000$300 $295 $290 $285 $270
A) 11.16%
B) 12.40%
C) 13.78%
D) 15.16%

Question

Quizplus · Accepted Answer

The IRR of the project is the discount rate at which the present value of all future cash flows equals the initial investment. Using a financial calculator, the IRR for this project is 13.78%. Since the IRR is greater than the WACC, the project should be accepted.

Thompson Stores Is Considering a Project That Has the Following