Task 7

Supera Ltd are looking to invest in a new 4 year project with an initial outlay of £575,000. The project is in a line of business where Supera Ltd. has limited previous experience. All cash inflows occur at the end of each year.

i) Calculate the IRR of the project by discounting the cashflows by 4% and 8% and then applying the IRR formula – perform your workings on excel including formulas. A copy of the data above is provided in the “Task 7 - Data” tab of the Excel file “MBF Summative data.xlsx” . There is also a present value table on the last tab of the same excel file.

ii) Check your answer using the IRR function in excel

iii) Supera Ltd has a set hurdle rate of 7.5% for projects. Assess whether or not it should accept the project based on your calculations and other information provided.

iv) Explain one advantage and one disadvantage of the IRR technique of investment appraisal.  

Final-MBF-Summative-data-for-students