- 2069 Poush
IRR evaluation, MARR 20%
Short answer
Solve PW=0 by trial: between 50% and 55%, IRR ≈ 54.5%, far above MARR of 20%, so the project is highly acceptable.
Use IRR method to evaluate the following project when MARR is 20%.
| End of year | Cash flow |
|---|---|
| 0 | -60,000 |
| 1 | 20,000 |
| 2 | 40,000 |
| 3 | 50,000 |
| 4 | 50,000 |
| 5 | 70,000 |
Year : 0 1 2 3 4 5
CF : -60,000 20,000 40,000 50,000 50,000 70,000
The cash flow has one sign change, so a single IRR exists. IRR is the i at which PW(i) = 0.
Trial and error
| i | PW(i) |
|---|---|
| 20% | +65,624 |
| 40% | +18,946 |
| 60% | -5,363 |
| 50% | +5,021 |
| 55% | -534 |
PW changes sign between 50% and 55%. Interpolating:
IRR = 50 + 5 × 5021 / (5021 − (-534)) = 54.5% (exact root 54.49%)
Decision
IRR = 54.5% > MARR = 20%. (At MARR 20%, PW = +Rs 65,624 > 0 confirms this.)
Answer: IRR ≈ 54.5%, which is much higher than 20%, so the project is acceptable.
✓ Answer checked by Claude Opus 5.5 (high effort)
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