Sharmila is project manager for WrenMarts roof-top solar initiative. The projects free cash flows are estimated as follows:

WrenMarts estimated cost of capital is 8.30% per year, but Sharmila questions whether it is the correct hurdle rate for the solar project. WrenMarts brand will be thought of more favorably by customers if WrenMart proceeds with the environmentally friendly initiative, but this favorable impact on the brand is not reflected in project cash flows.

To better understand whether WrenMart should accept or reject the project, start by calculating the solar project's IRR.