IRR in CFAI practice

CFA Level I Quant
#1

This is a question from the practice in CFAI:

Q. A project offers the following incremental after-tax cash flows (CF):

Year** 0 1 2 3 4 5 6** Cash flow (€) −12,500 2,000 4,000 5,000 2,000 1,000 500

The internal rate of return (IRR) of the project is closest to:

  1. 5.5%.
  2. 2.5%.
  3. 4.4%.

But using my calculator I found another answer: 7.053%

What did I do wrong?

#2

Got me.

Try it again.

#3

It is weird. Now it displays 5.47. I hope it won’t play tricks on me Saturday!

#4

For 7.053%, CF0=-12,000. :bulb:

Might be an idea to take a couple of seconds to double check inputs. :+1:

#5

Its 5.5%.

Guess you just need to check the inputs.