Thorley 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 or negative, in both cases it will be rejected. Year 0 1 2 3 4 5 Cash flows -$1,100 $325 $325 $325 $325 $325

IRR =  14.59%

Explanation:

Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested

IRR can be calculated using a financial calculator

Cash flow in year 0 = -$1,100

Cash flow in year 1 = $325

Cash flow in year 2 = $325

Cash flow in year 3 = $325

Cash flow in year 4 = $325

Cash flow in year 5 = $325

IRR =  14.59%

To find the IRR using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.  

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