From a spreadsheet which you will use as a framework, you will calculate the Internal Rate of Return generated by the project you analyzed in  step 2.

Process

Replace the WACC (initially 7%, cell B26) by 10%, 20%, 30% and 40%.

You observe that the NPV goes down and turns negative.

Introduce in cell B49 the finance function provided by the spreadsheet which directly calculates the IRR (menu: Insert, Function, IRR generally…). You have to provide the cell range (take care: cells B40-J40, before discounting) and a discount rate estimate as a starting point to help the spreadsheet start its calculations.

Excel gives you the Internal Rate of Return  (IRR)

To make sure you got the right figure, replace the discount rate (WACC) in cell B26 by the IRR provided by the spreadsheet: you should get a Net Present Value close to zero (‘close to’ because of rounded figures…).

Once you have finished the exercise :