Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Free Spirit Industries is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $850,000 Free Spirit Industries has been
Free Spirit Industries is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $850,000 Free Spirit Industries has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because returns in percentage form are easier to understand and compare to required returns. Free Spirit Industries's WACC is 9%, and project Sigma has the same risk as the firm's average project. The project is expected to generate the following net cash flows Which of the following is the correct calculation of project Sigma's IRR? Year Cash Flow Year $375,000 Year 2 $500,000 Year 3 $450,000 Year 4 $475,000 O 31.45% o 37.00% O 29.60% O 33.30%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started