Question

Exercise 26-17A Using Excel to compute IRR LO P4 Following is information on two alternative investments being considered by Jolee Company. The company requires a 11% return from its investments. Project A $(162, 000) Project B $(107,000) Initial investment Expected net cash flows in: Year 1 Year 2 Year 3 Year 4 Year 5 40, 500 56, 500 80, 795 90, 900 65,500 32,500 50, 500 66, 500 66,500 66,500 Compute the internal rate of return for each of the projects using excel functions. (Round your answers to 2 decimal places.) IRR Project A Project B %

Answer 1

INTERNAL RATE OF RETURN USING EXCEL FUNCTIONS

The rate at which Net present value is zero is called Internal return of return.

Calculation of Internal rate of return:

A B с D E 1 2 3 4 5 Particulars Initial Investment Cash Flow from Year 1 Cash Flow from Year 2 Cash Flow from Year 3 Cash Flow from Year 4 Cash Flow from Year 5 Internal Rate of Return Project A Project B ($162,000) ($107,000) $40,500 $32,500 $56,500 $50,500 $80,795 $66,500 $90,900 $66,500 $65,500 $66,500 26.76% 38.00% 6 7 8 9 10

IRR with formulas

А B C D E 1 2. 3 4 5 Particulars Initial Investment Cash Flow from Year 1 Cash Flow from Year 2 Cash Flow from Year 3 Cash Flow from Year 4 Cash Flow from Year 5 Internal Rate of Return Project A -162000 40500 56500 80795 90900 65500 =IRR(C3:08) Project B - 107000 32500 50500 66500 66500 66500 =IRR(D3:08) 6 7 8 9 10 11

All the best...