Question

I dont know how to solve it

- The ne w wapendafya then the On 26

Answer 1

C26 X for IRR(C20:C25,10%) G H I cost of machine annual benefits life of machine $ 390,875 $ 125,000 at internal rate of return (IRR), the present value of cash outflows shall be equal to present value of cash inflows cost of machine = annual benefits * present value annuity factor (r%, 5 periods) $390,875 = $125,000 * present value annuity factor (r%, 5 periods) present value annuity factor (r%, 5 periods) = $390,875 / $125,000 present value annuity factor (r%, 5 periods) = 3.127 look at the present value of annuity of $1 table look the value 3.127 in the 5 years row the rate corresponding to 3.127 is the internal rate of return (IRR) and looking at the table, the internal rate of return (IRR) is 18% hence, the correct answer is B. 18% OR internal rate of return (IRR) can be calculated using excel as shown below - year cash flow -$ 390,875 $ 125,000 $ 125,000 $ 125,000 $ 125,000 $ 125,000 IRR = 18%

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