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BMI project's IRR

BMI is considering a project that has a cost of $33,578.17 and it's expected net cash inflows are $12,000 per year for 4 years. What is the project's IRR?

10%
13%

16%

18%

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A firm with a cost of capital of 13 percent is evaluating three capital projects. The internal rates of return are as follows:

Project Internal Rate of Return

1 12%

2 15

3 14

The firm should __________.
(hint: Positive NPV is the key)

A) accept Project 2 and reject Projects 1 and 3

B) accept Projects 2 and 3 and reject Project 1

C) accept Project 1 and reject Projects 2 and 3

D) accept Project 3 and reject Projects 1 and 2

Solution Preview

BMI is considering a project that has a cost of $33,578.17 and it's expected net cash inflows are $12,000 per year for 4 years. What is the project's IRR?

10%
13%

16%

18%

IRR is the rate at which NPV = 0

- 33,578.17 + 12000(1+I)^1 + ...

$2.19