Shanghai Shipping is considering investing in a project that requires an after-tax initial investment of 156 million and is expected to produce after-tax cash inflows of $40 million for each of the next five years.The firm's cost of capital is 8%.Based on this information, the IRR of the project is _________ percent and the firm should _________ the project.

Question

Quizplus · Accepted Answer

The IRR can be calculated using a financial calculator or Excel function. Using Excel function, =IRR(range of cash flows, initial investment), the IRR is 9.03%. Since the IRR is greater than the cost of capital, the project should be accepted. Therefore, the best choice is C, accept.

Shanghai Shipping Is Considering Investing in a Project That Requires