Answer to Question #66304 in Economics for Mage

Question

A project has the following cash flows



The cost of the project is Ksh150, 000. Determine whether project is acceptable if the cost of capital is 18% using the IRR method. (10mks)

Answer 1

To determine whether project is acceptable we should calculate NPV (net present value) or IRR (internal rate of return which is the cost of capital when NPV = 0).
You can calculate IRR using NPV formula or using solver or formula IRR in excel and then compare it with our cost of capital, which is 18%. If IRR > 18%, then the project should be accepted.
In this case we can't calculate IRR without data for cash flows.