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A firm evaluates all of its projects by applying the IRR rule. Year Cash Flow 0 –$ 152,000 1 64,000 2 75,000 3 59,000 What is the project's IRR? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Internal rate of return % If the required return is 13 percent, should the firm accept the project?

Respuesta :

Answer:

8.98%

The project shouldn't be accepted

Explanation:

The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.

IRR can be calculated using a financial calculator:

Cash flow in year 0 = –$ 152,000

Cash flow in year 1 = 64,000

Cash flow in year 2 = 75,000

Cash flow in year 3 = 59,000 

IRR = 8.98%

The decision rule is to accept a project if the IRR is greater than the required rate of return and reject if it isn't.

Th project shouldn't be accepted because the IRR is less than the required rate of return.

To find the IRR using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.

I hope my answer helps you

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