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What is the IRR of the new menu item project

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Question - A fast food restaurant is considering the addition of a new menu item. Introduction of the new menu item would require an initial investment of $874,200, and the project is projected to produce $300,000 of after-tax cash flows for each of the next four years. The fast food restaurant has a weighted average cost of capital of 15% and makes project investment decisions on the basis of internal rate of return (IRR). What is the IRR of the new menu item project, and should the fast food restaurant accept or reject the project?

a. 37%, accept the project

b. 9%, reject the project

c. 19%, accept the project

d. 14%, reject the project

Reference no: EM133034004

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