CFA Practice Question

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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.

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.
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