A company is considering two investments. Both have an estimated useful life of 5 years and require an initial cash outflow of $15,000. The cash inflow for each project is shown below:
Project A |
Project Z |
Year 1 |
$7,000 |
$ 0 |
Year 2 |
8,000 |
5,000 |
Year 3 |
9,000 |
5,000 |
Year 4 |
0 |
5,000 |
Year 5 |
0 |
25,000 |
The company requires an 8% rate of return and uses straight-line depreciation. Which one of the following capital budgeting evaluation methods would result in an initial recommendation of the least profitable project as the better choice? |
A. |
Internal rate of return. |
Answer (A) is incorrect. Project Z's IRR of 27.1% is greater than Project A's IRR of 26.4%. This indicates that Project Z is the better projec |
|
here i want to get how he calculate the irr 27.1 and 26.4
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[sameh] [sayed] [mahmoud]
[senior accountant]
[el manar group]
[giza] [haram]
[EGYPT]
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