Answer to Question #66304 in Other Economics for Mage
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)
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.