Your firm has an average-risk project under consideration. You choose to fund the project in the same manner as the firm's existing capital structure. If the cost of debt is 9.00%, the cost of preferred stock is 12.00%, the cost of common stock is 16.00%, and the WACC adjusted for taxes is 14.00%, what is the IRR of the project given the expected cash flows listed here? Use a financial calculator to determine your answer.
A) About 12.13%
B) About 14.00%
C) About 24.95%
D) There is not enough information to answer this question.

Question

Your firm has an average-risk project under consideration. You choose to fund the project in the same manner as the firm's existing capital structure. If the cost of debt is 9.00%, the cost of preferred stock is 12.00%, the cost of common stock is 16.00%, and the WACC adjusted for taxes is 14.00%, what is the IRR of the project given the expected cash flows listed here? Use a financial calculator to determine your answer. 
A) About 12.13% 
B) About 14.00% 
C) About 24.95% 
D) There is not enough information to answer this question.

Quizplus · Accepted Answer

The IRR of the project is approximately 12.13%. This can be calculated using a financial calculator or spreadsheet by inputting the cash flows and solving for the discount rate that results in a net present value of zero.

Your Firm Has an Average-Risk Project Under Consideration