Question

Question 13:

A firm is considering a project that has the following cash flow.

Year	0	1	2	3	4	5
Cash flows	−$9,500	$2,000	$2,025	$2,050	$2,075	$2,100

What is the project's IRR?

Answer 1

Cash Flows:
Year 0 = -$9,500
Year 1 = $2,000
Year 2 = $2,025
Year 3 = $2,050
Year 4 = $2,075
Year 5 = $2,100

Let IRR be i%

NPV = -$9,500 + $2,000/(1+i) + $2,025/(1+i)^2 + $2,050/(1+i)^3 + $2,075/(1+i)^4 + $2,100/(1+i)^5
0 = -$9,500 + $2,000/(1+i) + $2,025/(1+i)^2 + $2,050/(1+i)^3 + $2,075/(1+i)^4 + $2,100/(1+i)^5

Using financial calculator, i = 2.57%

IRR of the project is 2.57%