Homework Answers
IRR is the Rate at which PV of Cash Inflows are equal to PV of Cash Outflows.
| Year | CF | PVF @9% | Disc CF | PVF @10% | Disc CF |
| 0 | $ -2,90,000.00 | 1.0000 | $ -2,90,000.00 | 1.0000 | $ -2,90,000.00 |
| 1 | $ 44,000.00 | 0.9174 | $ 40,366.97 | 0.9091 | $ 40,000.00 |
| 2 | $ 75,000.00 | 0.8417 | $ 63,126.00 | 0.8264 | $ 61,983.47 |
| 3 | $ 1,16,000.00 | 0.7722 | $ 89,573.28 | 0.7513 | $ 87,152.52 |
| 4 | $ 1,40,000.00 | 0.7084 | $ 99,179.53 | 0.6830 | $ 95,621.88 |
| NPV | $ 2,245.79 | $ -5,242.13 | |||
IRR = Rate at which least +ve NPV + [ NPV at that rate / Change in NPV due to 1% inc in disc Rate ] * 1%
= 9% + [ 2245.79 / 7487.91 ] * 1%
= 9% + 0.30%
= 9.30%
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