Warr Company 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 or negative,in both cases it will be rejected.
? $$\begin{array} { l c c c c c }
\text { Year } & 0 & 1 & 2 & 3 & 4 \
\hline \text { Cash flows } & - \$ 1540 & \$ 400 & \$ 400 & \$ 400 & \$ 400
\end{array}$$
?
A) 4.13%
B) 0.99%
C) 5.41%
D) 3.58%
E) 1.22%

Question

Warr Company 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 or negative,in both cases it will be rejected.
? $$\begin{array} { l c c c c c } 
\text { Year } & 0 & 1 & 2 & 3 & 4 \
\hline \text { Cash flows } & - \$ 1540 & \$ 400 & \$ 400 & \$ 400 & \$ 400
\end{array}$$
?
A) 4.13%
B) 0.99%
C) 5.41%
D) 3.58%
E) 1.22%

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. In this case, option C (5.41%) is the correct IRR for the project, as it is the rate at which the present value of the project's cash inflows equals the initial investment, making the NPV equal to zero. Calculating IRR typically requires using financial calculators or software because it involves solving for the rate in the NPV equation.

Warr Company Is Considering a Project That Has the Following