question archive You are analyzing a potential project that will cost 1875 to invest in today, will generate cash inflows of 230 per year starting in one year and continuing forever, and has a discount rate of 12%
You are analyzing a potential project that will cost 1875 to invest in today, will generate cash inflows of 230 per year starting in one year and continuing forever, and has a discount rate of 12%
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You are analyzing a potential project that will cost 1875 to invest in today, will generate cash inflows of 230 per year starting in one year and continuing forever, and has a discount rate of 12%. What is the IRR of the project? Should you accept the project based on its IRR?
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At irr,present value of inflows=present value of outflows.
Hence irr=Annual cash inflows/Cost of project
=230/1875
=12.27%(Approx)
