Technology Corp. is considering a $238,160 investment in a new marketing campaign that it anticipates will provide annual cash flows of $52,000 for the next five years. The firm has a 6% cost of capital. What should the analysis indicate to the firm's managers? (a) IRR is 8%. Accept the project.

(b) IRR is 3%. Reject the project.

(c) IRR is 4%. Reject the project.

(d) IRR is 6%. Accept the project.

Question

Business

Gutierrez

24 September, 05:29

Technology Corp. is considering a $238,160 investment in a new marketing campaign that it anticipates will provide annual cash flows of $52,000 for the next five years. The firm has a 6% cost of capital. What should the analysis indicate to the firm's managers? (a) IRR is 8%. Accept the project.

(b) IRR is 3%. Reject the project.

(c) IRR is 4%. Reject the project.

(d) IRR is 6%. Accept the project.

+1

Answers (1)

Know the Answer?

Angus · Answer 1

B) IRR is 3%. Reject the project.

Explanation:

We can use an excel spreadsheet to calculate the internal rate of return (IRR) for this investment:

we can use the IRR function = IRR (values,[guess])

where:

value 1 = - 238160 value 2 to 6 = 52000 guess = optional, not required

=IRR (-238160,52000,52000,52000,52000,52000) = 3%