Given the following end of year cash flows, what is the IRR of this project? Also...

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Given the following end of year cash flows, what is the IRR of this project? Also...

Given the following end of year cash flows, what is the IRR of this project? Also assume that following year four the cash flows will grow by 3% in perpetuity. Enter your answer as a percent without the “%”; round your final answer to two decimals.

Timeline	0	1	2	3	4
Cash Flow	-4000	200	350	400	500

business finance

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Answer 1

Answer #1

Perpetuity amount = 500/.03

= $16666.67

Thus we will find the IRR using following formula

4000 = 200/(1+IRR)^1 + 350/(1 + IRR) ^2 + 400/(1+IRR)^3 + 500/(1 + IRR)^4 + 16666.67/(1+IRR)^4

using trial and error method we will find the value of IRR which is given as below:

IRR = 47.96%

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Answer 2

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