12-10. Continued If the student skipped from 14% to 16%, the calculations to find the IRR would be as follows Year Cash Flow PVIF at 16% PresentⅤ Value $10000 862 $8620 9.000 743 6.687 6.500 641 4.167 $19,474 $20079……PV@14%$20,079…PV@14% 19474 PV@16%-20000 Cost $605 $79 14%+($79/$605)(2%)=131(2%) 14%+(131)(2%)=14.262% This answer is very close to the previous answer. the difference is due to rounding b. Since the IrR of 14.265%(or 14.262%)is greater than the cost of capital of 12%, the project should be accepted S-433 Copyright C2005 by The McGra-Hill Companies, Inc.Copyright © 2005 by The McGraw-Hill Companies, Inc. S-433 12-10. Continued If the student skipped from 14% to 16%, the calculations to find the IRR would be as follows: Year Cash Flow PVIF at 16% Present Value 1 $10,000 .862 $ 8,620 2 9,000 .743 6,687 3 6,500 .641 4,167 $19,474 $20,079...............PV @ 14% –19,474...............PV @ 16% $ 605 $20,079 ...............PV @ 14% –20,000...............Cost $ 79 14% + ($79/$605) (2%) = .131 (2%) 14% + (.131) (2%) = 14.262% This answer is very close to the previous answer, the difference is due to rounding. b. Since the IRR of 14.265% (or 14.262%) is greater than the cost of capital of 12%, the project should be accepted