Question

Deep Waters, Inc. is using the internal rate of return (IRR) when evaluating projects. Find the IRR for the company’s project. The initial outlay for the project is $356,300. The project will produce the following after-tax cash inflows of

Year 1: 160,500

Year 2: 28,500

Year 3: 150,700

Year 4: 143,800

Round the answer to two decimal places in percentage form.

Answer 1

A В C Cash flows 2 Year 3 A 4 -3,56,300.00 1,60,500.00 5 0 6 1 28,500.00 7 2 1,50,700.00 8 3 1,43,800.00 4 10 11 IRR(C5:B9,(10%)) 12 IRR = 0.13092 13 So, internal rate of return 13.09% 14 15 16 Cross check 17 18 At IRR, Present value of cash inflows Present value of cash outflows 19 At IRR, Net present value 0 20 21 Computation of NPV 22 Cash flows Present Value Fac Present Value Year B 1/(1 +R)An R 13.092% C A*B 23 n 24 -3,56,300.00 25 0 1 -3,56,300.00 1,60,500.00 26 1 0.884235843 1,41,919.85 27 2 28,500.00 0.781873027 22,283.38 1,50,700.00 28 3 0.691360155 1,04,187.98 1,43,800.00 0.61132543 29 4 87,908.60 30 NPV 31 32 st