Question

Fly High Inc. intends to invest in a new airplane. Information regarding the investment in the airplane is given below: Project A Life of project 5 years Initial investment $33,277,644 Net annual after-tax cash inflow $7,900,000 The cost of capital for the company is 8%. Calculate the internal rate of return (IRR) for the new airplane. a.10% b.8% c.6% d.5%

Answer 1

c.6%

Step-by-step explanation:

IRR is the interest rate at which the NPV of a project is zero

Use the following steps to determine the IRR

1. Determine the cash flows

2. Calculate the Total Annual cash flow

3. Use the IRR function in Excel to calculate the IRR for the calculated cash flow

The working is attached with this answer please find it.