Assume you invest $8,400 today in an investment that promises to return $ 32,223 in exactly...
Assume you invest $8,400 today in an investment that promises to return $ 32,223 in exactly 10 years.
a. Use the present-value technique to estimate the IRR on this investment.
b. If a minimum annual return of 17 % is required, would you recommend this investment?
a. The IRR of the investment is nothing %.
Homework Answers
a. IRR internal rate of return is used to calculate the profitability of a given investment, the same can be calculated by using the built-in Excel function:
=RATE(nper,pmt,pv,fv,,)
=RATE(10,0,-8400,32223,,)
=14.39%
b. The minimum annual return of 17% is required from the project but the given investment only offers a return of 14.39%, hence I would not recommend the investment.
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