Simkins Renovations Inc A $13.13 \%$ B $14.44 \%$ C $15.89 \%$ D $17.48 \%$

question 32

Short Answer

Simkins Renovations Inc. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected. $\begin{array}{c}\begin{array}{lll} \text {Year}\\\text {Cash flows}\end{array}\begin{array}{lll} 0 \\\hline -\$850 \end{array}\begin{array}{lll}1 \\\hline \$300\end{array}\begin{array}{lll}2 \\\hline \$290\end{array}\begin{array}{lll}3 \\\hline \$280\end{array}\begin{array}{lll}4 \\\hline \$270\end{array}\end{array}$

a $13.13 \%$
b. $14.44 \%$
c. $15.89 \%$
d. $17.48 \%$
e. $19.22 \%$

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Definitions:

Random Variable

A quantity whose value is subject to variations due to chance (statistical randomness).

Numerical Description

The summary or representation of data through numbers, including measures of central tendency and variability.

Experiment

A process that generates well-defined outcomes.

Expected Value

The long-run average value of repetitions of the experiment it represents, reflecting the probability-weighted average of all possible values.