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IRR, investment life, and cash inflows Oak Enterprises accepts projects earning more than the firms 11% cost of capital. Oak

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Answer #1

a)
Nper = 10
PMT = 50000
PV = 304600
FV = 0

IRR can be calculated by using the following excel formula:
=RATE(nper,pmt,pv,fv)
=RATE(10,50000,-304600,0)
= 10.20%

IRR = 10.20%

b)
Rate = 11%
PMT = 50000
PV = 304600
FV = 0

Number of years can be calculated by using the following excel formula:
=NPER(rate,pmt,pv,fv)
=NPER(11%,50000,-304600,0)
= 10.63 years

Additional years = 10.63 - 10 = 0.63 years

c)
Nper = 10
PV = 304600
Rate = 11%
FV = 0

Annual cash flow can be calculated by using the following excel formula:
=PMT(rate,nper,pv,fv)
=PMT(11%,10,-304600,0)
= $51,721.51

Annual cash flow = $51,721.51

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