A Company Is Considering an Iron Ore Extraction Project That

A company is considering an iron ore extraction project that requires an initial investment of $1,300,000 and will yield annual cash flows of $789,314 for two years.The company's discount rate is 9%.Calculate IRR. Present value of ordinary annuity of $1:
$$\begin{array} { r r r r r r r r } & 10 \% & 12 \% & 14 \% & 15 \% & 16 \% & 18 \% & 20 \% \\1 & 0.909 & 0.893 & 0.877 & 0.870 & 0.862 & 0.847 & 0.833 \\2 & 1.736 & 1.690 & 1.647 & 1.626 & 1.605 & 1.566 & 1.528 \\3 & 2.487 & 2.402 & 2.322 & 2.283 & 2.246 & 2.174 & 2.106 \\4 & 3.170 & 3.037 & 2.914 & 2.855 & 2.798 & 2.690 & 2.589\end{array}$$

A) 14%
B) 16%
C) 13%
D) 12%

Correct Answer:

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