A firm is considering a project that requires an initialinvestment of $180,000. The life of this project is five years.Cash flows for each year are estimated as follows:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| $105,000 | $190,000 | $50,000 | -$60,000 | -$110,000 |
The cost of capital of this project is 8%. Calculate theinternal rate of return of the project and make a decision.
- Accept since the IRR is 5.04%, which is less than the requiredrate.
- Accept since the IRR is 12.68%, which is greater than therequired rate.
- Reject since the IRR is 5.04%, which is less than the requiredrate.
- Reject since the IRR is 12.68%, which is greater than therequired rate.
- Cannot be determined.
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