Thompson Stores is considering a project that has the following cash flow data.What is the project's IRR? $\begin{array}{lccccccc}
\text { Year: } & 0 & 1 & 2 & 3 & 4 & 5 & \
\text { Cash } & -\$ 1,000 & & \$ 300 & \$ 295 & \$ 290 & \$ 285 & \$ 270 \
\text { flows: } & & & & & &
\end{array}$
A)11.16%
B)12.40%
C)13.78%
D)15.16%

Question

Thompson Stores is considering a project that has the following cash flow data.What is the project's IRR?​​​ $\begin{array}{lccccccc}
\text { Year: } & 0 & 1 & 2 & 3 & 4 & 5 & \
\text { Cash } & -\$ 1,000 & & \$ 300 & \$ 295 & \$ 290 & \$ 285 & \$ 270 \
\text { flows: } & & & & & &
\end{array}$ ​​
A)11.16%
B)12.40%
C)13.78%
D)15.16%

Quizplus · Accepted Answer

To calculate the IRR, we need to find the rate at which the present value of cash inflows equals the initial investment of $1000. We can use trial and error or a financial calculator to find the IRR.

Using a financial calculator, we input the cash flows as follows:

CF0 = -1000 
CF1 = 300 
CF2 = 295 
CF3 = 290 
CF4 = 285 
CF5 = 270

Then, we compute the IRR which is 13.78%

Therefore, the best choice for the project's IRR is C)13.78%

Thompson Stores Is Considering a Project That Has the Following