Internal Rate of Return = 8.15%

Let's use the following notations:

• Net Present Value = NPV
• Cash Flow in the ithith period = CFiCFi; i= 0, 1, 2, ........ n

• Internal Rate of Return (IRR) = r
• Project length = n

Then, IRR is that value of r which satisfies the equation:

NPV = 0

Here's what we're given in this problem:

• Project length, n = 3
• Cash flow stream (in $) = ( -10,000, 3880.33, 3880.33, 3880.33)

For the calculation of IRR, let's equate the value of NPV to zero.

0=−10,000+3880.33(1+r)+3880.33(1+r)2+3880.33(1+r)30=−10,000+3880.33(1+r)+3880.33(1+r)2+3880.33(1+r)3

10,000=3880.33(1+r)[1+1(1+r)1+1(1+r)2]10,000=3880.33(1+r)[1+1(1+r)1+1(1+r)2]

2.57(1+r3+3r2+3r)=3+3r+r22.57(1+r3+3r2+3r)=3+3r+r2

0=2.57r3−6.71r2−4.71r+0.430=2.57r3−6.71r2−4.71r+0.43

Solving the cubic equation, we get, r = 0.0815

Since, the hurdle rate, RRR ( 10 %) > IRR (8.15%), the project is not likely to be accepted by potential investors.