Toy Town is considering a new toy that will cost $49,100 in startup costs.The toy is expected to produce cash flows of $47,500 in Year 1 and $18,600 in Year 2.The toy will be discontinued after the second year.The discount rate assigned to the toy is 14.9 percent.Should the toy be produced? What is the IRR?
A)Yes;26.65%
B)Yes;41.79%
C)Yes;38.03%
D)No;26.65%
E)No;41.79%

Question

Quizplus · Accepted Answer

NPV = $0 = -$49,100 + $47,500/(1 + IRR)+ $18,600/(1 + IRR)²IRR = 26.65%

Toy Town Is Considering a New Toy That Will Cost