Please solve the following problem WITHOUT USING EXCEL.
NPV @ 11.40% discount rate = Present value of cash inflows -
cash outflow
= (500/(1+0.114)^1) + (400/(1+0.114)^2) + (300/(1+0.114)^3) +
(100/(1+0.114)^4) - 1,000
= 448.83 + 322.32 + 217 + 64.93 - 1,000
= $53.09
NPV = $53.09
NPV @16% discount rate = (500/(1+0.16)^1) + (400/(1+0.16)^2) +
(300/(1+0.16)^3) + (100/(1+0.16)^4) - 1,000
= 431.03 + 297.27 + 192.20 + 55.23 - 1000
= -24.27
IRR = Lower rate + (NPV of lower rate / Total difference) *
Difference in rate
= 11.40% + (53.09/77.363945) * 4.6
= 11.40 + 3.16 * 4.6
= 14.49% (Approx)
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