Consider the following annual project cash flows: CF0 = -$200, CFI = $150, CF2 = $50, and CF3 = $100

Finance Apr 01, 2021

Consider the following annual project cash flows: CF0 = -$200, CFI = $150, CF2 = $50, and CF3 = $100. The required rate of return is 10%, the NPV is $53, and the IRR is 26%. By how much would the IRR change if the required rate of return would increase from 10% to 15%? a) IRR would increase by 50 percentage points. b) IRR would decrease by 50 percentage points. c) IRR would increase by 1/3. d) IRR would decrease by 1/3. e) IRR would not change.

Expert Solution

The correct option is E "IRR would not change".

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