Question

Bruin, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -37,500 -37,500 1 17,300 5,700 2 16,200 12,900 3 13,800 16,300 4 7,600 27,500 a) What is the IRR for each of these projects

Answer 1

IRR for project A = 19.71%

IRR for project B= 18.76%

Step-by-step explanation:

Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested

IRR can be calcuated using a finanical calcuator

for project A :

Cash flow in year 0 = -37,500

Cash flow in year 1 = 17,300

Cash flow in year 2 = 16,200

Cash flow in year 3 = 13,800

Cash flow in year 4 = 7,600

IRR = 19.71%

for project B :

Cash flow in year 0 = -37,500

Cash flow in year 1 = 5,700

Cash flow in year 2 = 12,900

Cash flow in year 3 = 16,300

Cash flow in year 4 = 27,500

IRR = 18.76%

To find the IRR using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.