Calculate the internal rate of return for the company

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Problem 1: A company is considering a 5-year project. The company plans to invest $90,000 now and forecasts cash flows for each year of $27,000. The company requires that investments yield a hurdle rate of at least 14%. Calculate the internal rate of return (IRR) to determine whether the company should accept this project. Selected factors for the present value of an annuity of $1 for 5 years are shown below:

Interest Rate                                                         Present Value of an Annuity of $1 for 5 Years

10%............................................................................3.7908
12%...........................................................................3.6048
14%............................................................................3.4331

Select one or more:

a. The project should be accepted because it will earn more than 14%.

b. The project should be accepted because it will earn more than 10%.

c. The project will earn more than 12% but less than 14%. At a hurdle rate of 14%, the project should be rejected.

d. The project should be rejected because it will earn exactly 14%.

e. The project will earn more than 14%. At a hurdle rate of 14%, the project should be rejected.

Reference no: EM133010828

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