The finance manager is considering a project that has the following forecasted

jagguarpaw January 18, 2017 0 Comments

Question: The finance manager is considering a project that…

The finance manager is considering a project that has the following forecasted Free Cash Flows:

Years           Cash Flow
0                       -$25,000
1                        $7,000
2                        $13,000
3                        $8,000
4                        $12,000
5                        $10,000

Assuming the WACC is 15% and a tax rate of 40%, do the following:

Compute the Internal Rate of Return (IRR) of the project and interpret the results.

Based on the IRR, should this project be accepted or rejected? Explain.