IRR is the rate at which PV of Cash Inflows are equal to PV of Cash Outflows
Project M:
Year | CF | PVF @12% | Disc CF | PVF @13% | Disc CF |
0 | $ -18,00,000.00 | 1.0000 | $ -18,00,000.00 | 1.0000 | $ -18,00,000.00 |
1 | $ 5,00,000.00 | 0.8929 | $ 4,46,428.57 | 0.8850 | $ 4,42,477.88 |
2 | $ 5,00,000.00 | 0.7972 | $ 3,98,596.94 | 0.7831 | $ 3,91,573.34 |
3 | $ 5,00,000.00 | 0.7118 | $ 3,55,890.12 | 0.6931 | $ 3,46,525.08 |
4 | $ 5,00,000.00 | 0.6355 | $ 3,17,759.04 | 0.6133 | $ 3,06,659.36 |
5 | $ 5,00,000.00 | 0.5674 | $ 2,83,713.43 | 0.5428 | $ 2,71,379.97 |
NPV | $ 2,388.10 | $ -41,384.37 |
IRR = Rate at which least +ve NPV + [ NPV at that Rate / Change in NPV due to 1% inc in Disc Rate ] * 1%
= 12% + [ 2388.10 / 43772.47 ] * 1%
= 12% + 0.05%
= 12.05%
IRR of Project M is 12.05%
Pls comment, if any further assistance is required.
:, what are the IRRs Internal rate of return and modified internal rate of return. Quark...
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