- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 5. Capital Investments and Capital Allocation
- Subject 2. Capital Allocation
CFA Practice Question
Saline Company is considering investing in a new project. The project will need an initial investment of $1,200,000 and will generate $600,000 (after-tax) cash flows for three years. Calculate the IRR for the project.
B. 18.6%
C. 23.4%
A. 14.5%
B. 18.6%
C. 23.4%
Correct Answer: C
User Contributed Comments 9
| User | Comment |
|---|---|
| zhaojiang | PV=-1,200,000 PMT=600,000 N=3, FV=0, CPT I/Y=22.38 |
| zax4 | Use CF option on BA II CF0 = -1200000 enter then press down arrow CF1 = 600000 enter then press down arrow F = 3 enter Press IRR then CPT Gives 23.4% |
| sarath | Best method is to use the CF options of the BA II Plus Professional Financial calculator.. |
| SueLiu | On the HP12C: CFo = -1200000 CFj = 600000 Nj = 3 Then just hit IRR. |
| Bibhu | CF option ( as given by zax4) is the correct way to calculate. zhaojiang answer could produce erroneous results in some questions. |
| mwali | Thanx zax4 I have finally managed to calculate with the BAII plus calculator. |
| Kobe8kenji | It is faster and easier to use zhaojiang's method if the cashflows are the same |
| seanj951 | but he got the wrong answer... |
| cfastudypl | The answer is not wrong, it is 23.3755 to 1dp becomes 23.4. I suggest you use the method you are familiar and confident with. Well done zhaojiang. |