A project has cash flows of -$1,000. -$2,000, +$3,000, and +$4,000 in consecutive years. Your cost...

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Finance

A project has cash flows of -$1,000. -$2,000, +$3,000, and+$4,000 in consecutive years. Your cost of capital is 30% perannum. Use the IRR rule to determine whether you should take thisproject and compare this result and approach with the net presentvalue method.
My answer: please check
A project has cash flows of -$1,000. -$2,000, +$3,000, and+$4,000 in consecutive years. Your cost of capital is 30% perannum. Use the IRR rule to determine whether you should take thisproject and compare this result and approach with the net presentvalue method.
Answer: The IRR for the project above is 56.00% which is higherthan the huddle rate of 30.00%. The NPV is negative 999.00, hence,we shouldn’t take this project forward.
Cash flows
($1,000)
($2,000)
$3,000
$4,000
56%
IRR
30.00%
Cost of Cap.
($999.00)
NPV

Answer & Explanation Solved by verified expert

4.1 Ratings (749 Votes)

Calculation ofNPV and IRRFormula ViewDecisionIf we consider IRR then it is 56 which isabove my required rate of return ie 30 and we See Answer

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Transcribed Image Text

A project has cash flows of -$1,000. -$2,000, +$3,000, and+$4,000 in consecutive years. Your cost of capital is 30% perannum. Use the IRR rule to determine whether you should take thisproject and compare this result and approach with the net presentvalue method.My answer: please checkA project has cash flows of -$1,000. -$2,000, +$3,000, and+$4,000 in consecutive years. Your cost of capital is 30% perannum. Use the IRR rule to determine whether you should take thisproject and compare this result and approach with the net presentvalue method.Answer: The IRR for the project above is 56.00% which is higherthan the huddle rate of 30.00%. The NPV is negative 999.00, hence,we shouldn’t take this project forward.Cash flows($1,000)($2,000)$3,000$4,00056%IRR30.00%Cost of Cap.($999.00)NPV


Cash flows	($1,000)	($2,000)	$3,000	$4,000

	56%	IRR
	30.00%	Cost of Cap.
	($999.00)	NPV