Question: Datta Computer Systems is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR

Datta Computer Systems 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.

Year

0

1

2

3

Cash flows

-$1,050

$450

$470

$490

a.

12.69%

b.

13.98%

c.

15.58%

d.

18.15%

e.

16.07%

7. Is the investment in Question 6 a good investment?

  1. Yes.
  2. No.
  3. It depends on the WACC.
  4. We should calculate the MIRR and only then we can decide.
  5. It depends on the Cross-Over Rate.

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