Light Sweet Petroleum Inc., is trying to evaluate a generation project with the following cash flows:
Year Cash Flow
0 -45,000,000
1 71,000,000
2 -15,000,000
If this company requires a return of 12% on its investments, should it accept this project? Why?
Compute the IRR for this project. How many IRRs are there? Using the IRR decision rule, should the company accept the project? What’s going on here?