A firm evaluates all of its projects by applying the IRR rule. The current proposed project has cash flows of -$37,048, $16,850, $15,700, and $19,300 for Years 0 to 3, respectively. The required return is 18 percent. What is the project IRR? Should the project be accepted or rejected?
A) 18.42 percent; accept
B) 16.05 percent; accept
C) 16.05 percent; reject
D) 18.42 percent; reject
E) 21.08 percent; reject

Question

Quizplus · Accepted Answer

Using a financial calculator or Excel, we can solve for the IRR of the project to be 18.42 percent. Since the project’s IRR is greater than the required return of 18 percent, the project should be accepted. Therefore, the best choice is A.

A Firm Evaluates All of Its Projects by Applying the IRR