Stone Sour, Inc., has a project with the following cash flows: Year Cash 0 -$27,
ID: 2726569 • Letter: S
Question
Stone Sour, Inc., has a project with the following cash flows:
Year Cash
0 -$27,000
1 11,900
2 14,900
3 10,900
The required return is 18 percent. What is the IRR for this project? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16)) IRR %
I worked this problem and from 18.00% to 19% is wrong. also 0.00% to 0.11% are wrong also. I have posted this question three times and would really like some help with getting the correct answer. Thank you for your time.
It asked in another part of the question to accept or reject and reject is the correct answer if that helps any.
Explanation / Answer
Year
CashFlow
0
(27,000)
1
11,900
2
14,900
3
10,900
IRR
18.98%
Alternatively:
Let us Try with 18%
Year
CashFlow
PV Factor@ 18%
PV
0
(27,000)
1
(27,000)
1
11,900
0.8475
10,085
2
14,900
0.7182
10,701
3
10,900
0.6086
6,634
NPV
420
As NPV is Positive let us try with 19%
Year
CashFlow
PV Factor@ 19%
PV
0
(27,000)
1
(27,000)
1
11,900
0.8403
10,000
2
14,900
0.7062
10,522
3
10,900
0.5934
6,468
NPV
(10)
IRR= R1+ NPV(R2-R1)/(NPV1-NPV2)
=18%+ 420 x(19-18)%/(420-(-10)
=18%+ 4.2/430
=18%+ 0.98
=18.98%
As IRR greater than Required Return Project is Acceptable
Year
CashFlow
0
(27,000)
1
11,900
2
14,900
3
10,900
IRR
18.98%