- CFA Exams
- CFA Exam: Level I 2021
- Study Session 10. Corporate Finance (1)
- Reading 32. Capital Budgeting
- Subject 3. Investment Decision Criteria

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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.

B. 18.6%

C. 23.4%

A. 14.5%

B. 18.6%

C. 23.4%

Correct Answer: C

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**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. |