- 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
Beaumont Bearings is analyzing two mutually exclusive projects with the following cash flows. Its cost of capital is 9%.
The IRRs for the two projects are:
A. X: 34.55%; Y: 27.87%
B. X: 10.5%; Y: 12.9%
C. X: 46.45%; Y: 54.85%
Explanation: By setting the NPV equal to zero and solving for the discount rate with the help of a financial calculator:
IRRX = 46.45%, IRRY = 54.85%
User Contributed Comments 5
| User | Comment |
|---|---|
| myanmar | is this irr too high for the TI BAII Plus i only get an "error 7" with this but "normal" irr's with other smaller cash flows in the years 1 to 3? |
| gizi | You did something wrong myanmar. The BA II Plus provides the coorect answer. |
| swallow2585 | can someone show the calc key in for BAII? |
| clipp | make sure to put in the negative outflow for C0. Then after inputting cash flows select "IRR" then "CPT" and you get your answer. |
| deleseleuc | CFo 10,000 (+-) ENTER Down Arrow CF01 8,000 ENTER Down Down CF02 7,000 ENTER Down Down CF03 4,000 ENTER IRR > CPT |