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Problem:

Frankies, LLC. is considering a project that has an initial outlay of $150,000. The respective future cash inflows from its four-year project for years 1 through 4 are: $60,000, $70,000, $75,000, and $70,000, respectively. Frankies uses the internal rate of return method to evaluate projects. Will Frankies accept the project if its opportunity cost is 12%?

Answer

Frankies will not accept this project because its IRR is about 6.50%.
Frankies will not accept this project because its IRR is about 9.60%.
Frankies will accept this project because its IRR is about 29.54%.
Frankies will accept this project because its IRR is about 18.70%.

Note: Please show how to work it out.

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Category:- Basic Finance
Reference No.:- M91162556

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