The Merriweather Printing Company is trying to decide on the merits of construct
ID: 1172590 • Letter: T
Question
The Merriweather Printing Company is trying to decide on the merits of constructing a new publishing facility. The project is expected to provide a series of positive cash flows for each of the next four years. The estimated cash flows associated with this project are as? follows:
If you know that the project has a regular payback of 2.1 ?years, what is the? project's IRR?
The IRR of the project is ____?%.?(Round to two decimal? places.)
Year Project Cash Flow 0 ? 1 $770,000 2 420,000 3 280,000 4 480,000Explanation / Answer
Ans) Payback period = 2.1 years
Project cash outflow = $770000 + $420000 + $280000 * 0.1
= $1,218,000
IRR of the project can be given by follwoing formula:
1218000 = 770000/(1+r) + 420000/(1+r)^2 + 280000/(1+r)^3 + 480000/(1+r)^4
while solving by trail and error we will get the value of r = 25.36%
The IRR of the project is 25.36%