Question

Nichols Inc. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the cost of capital or negative, in both cases it will be rejected.

Year 0 1 2 3 4 5
Cash flows −$1,250 $325 $325 $325 $325 $325

Answer 1

Answer:

9.43%

Explanation:

The computation of the internal rate of return is calculated by using the spreadsheet which is shown in the attachment

The internal rate of return is the return at which the net present value comes to zero i.e.

Net present value = 0

initial investment = Present value of cash flows after taking the discounting factor

After solving the given problem, the internal rate of return is 9.43%