Question

Table Tools EEE 21 AaBbCcl AaBb C AaBbcc AaBbce AaBbc. F Emphasis Heading 1 T Normal Strong Subtitle Paragraph Styles 25) Calculate the Internal Rate of Return based on the following data. Original Investment: $1,500 Year NPV Net Cash Flows Discount @ 10% Factor Discounted Cash Flow @10% Calculate NPV Discounted Discount Cash Flow @ 30% @30% Factor Calculate $2,000 8900 3300 $2,000 .7800 2200 $1,000 6800 0600

Answer 1

NPV = sum of all discounted cash flows including initial investment

IRR is the rate at which NPV = 0

year		Discounted cash flow @10%	Discounted cash flow @30%	IRR
0	-1500	-1500	-1500	-1,500
1	2000	1818	1538	948
2	2000	1653	1183	449
3	1000	751	592	106
	NPV	2722	1814	4

year		Discounted cash flow @10%	Discounted cash flow @30%	IRR @ 111%
0	-1500	=B2/1	=B2/1	=B2/1
1	2000	=B3/1.1^1	=B3/1.3^1	=B3/2.11^1
2	2000	=B4/1.1^2	=B4/1.3^2	=B4/2.11^2
3	1000	=B5/1.1^3	=B5/1.3^2	=B5/2.11^3
	NPV	=SUM(C2:C5)	=SUM(D2:D5)	=SUM(E2:E5)