Suppose ABC corp. is evaluating a project with the following incremental free-cash-flows (FCF) paid at the...

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Suppose ABC corp. is evaluating a project with the following incremental free-cash-flows (FCF) paid at the...

Suppose ABC corp. is evaluating a project with the following incremental free-cash-flows (FCF) paid at the end of the next four years. Which annual discount rate makes the NPV equal to zero? Enter your answer as a percent. Round your final answer to two decimals.

Timeline	0	1	2	3	4
FCF	-500	200	200	200	200

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Answer 1

Answer #1

We need to compute IRR, because IRR is the discount rate at which NPV is 0.

A B FCF 2 3 4 5 Time 0 1 2 -500 200 200 200 200 8 IRR 21.86% 9 A Time FCF -500 200 1 2 0 31 42 53 64 200 200 200 7 8 IRR =IRR(B2:B6) 10

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Answer 2

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