Homework Answers
The initial cash flow is CF0 = ($5,00,000)
CF1= $2,00,000
CF2= $2,00,000
CF3= $2,00,000
CF4= $2,50,000
So, the IRR of the project is . IRR is the rate at which the NPV is zero,
($5,00,000) + 2,00,000/ (1 + x)^1 + 2,00,000/ (1 +x)^2 + 2,00,000/ (1 + x)^3 + 2,50,000/ (1 + x)^4 = 0,
solving for X we get,
IRR = 24.2151
So, the IRR is between 20% and 25%.
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