Suppose you have an investment with the following expected cash flows: Years Investment A 0 -10000...
Suppose you have an investment with the following expected cash flows:
| Years | Investment A |
| 0 | -10000 |
| 1 | 3000 |
| 2 | 3000 |
| 3 | 6000 |
The IRR of this project is 8.55% per year. What you would have at the end of the third year if you reinvested each cash flow at 8.55%?
Homework Answers
IRR assumes reinvestment at IRR..8.55% is IRR so reinvesting at 8.55% means reinvesting at IRR. This would give value at the end of the third year=Initial cost*(1+IRR)^3=10000*1.0855^3=12790.56
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Suppose you have an investment with the following expected cash
flows:
Years
Investment A
0
-10000...
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