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Initial Rate of Return

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A company is analyzing two mutually exclusive projects, S and L, with the following cash flows:

0 1 2 3 4
Project S -$1,000 $990 $250 $10 $10
Project L -$1,000 $0 $250 $400 $800

The company's WACC is 10 percent. What is the IRR of the better project? (Hint: Note that the better project may or may not be the one with the higher IRR.)

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This provides the steps to calculate the Initial Rate of Return

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A company is analyzing two mutually exclusive projects, S and L, with the following cash flows:

0 1 2 3 4
Project S -$1,000 $990 $250 $10 $10
Project L ...

Purchase this Solution


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