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Calculate the project irr by using an iterative approach

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Reference no: EM132592171

Hamstring Inc. is considering a project with the following cash flows.

  C0              C1                  C2                 C3                   C4

($25,000)   $10,000        $12,000          $5000        $8000

The company is reluctant to consider projects with paybacks of more than three years. If projects pass the payback screen, they are considered further by means of the NPV and IRR methods. The firm's cost of capital is 11%.

Question a. What is the project's payback period? Round the answer to two decimal places.

Question b. What is the project's NPV? Do not round intermediate calculations. Round PVFA values in intermediate calculations to four decimal places. Round the answer to two decimal places.

Does NPV indicate acceptance on a stand-alone basis?

Question c. Calculate the project's IRR by using an iterative approach. Start by using the cost of capital and the NPV calculation from part b. Do not round intermediate calculations. Round PVFA values in intermediate calculations to four decimal places. Round your answer to the nearest whole percentage.

Does IRR indicate acceptance on a stand-alone basis?

Question d. What is the project's PI? Do not round intermediate calculations. Round the answer to two decimal places.

Does PI indicate acceptance on a stand-alone basis?

Reference no: EM132592171

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