Question

n Project b 300 1 500 k b 3 -130 What is the IRR of the project above? MARR =12% 30- 30.5% 30.5 - 31% 31 - 31.5% 31.5 -32% 32 -32.5% None of the above

please help with both questions thank u:)

Answer 1

ANSWER:

1) In order to find the irr we will equate the pw to zero.

pw = cash flow in year 0 + cash flow in year 1(p/f,i,n) + cash flow in year 2(p/f,i,n) + cash flow in year 3(p/f,i,n)

0 = - 300 + 500(p/f,i,1) + o(p/f,i,2) - 130(p/f,i,3)

300 + 130(p/f,i,3) = 500(p/f,i,1)

solving via trial and error we get that i is between 46% and 47% and solving further we get that i is 46.47%

so none of the above is the right answer.

2) In order to find the irr we will equate the pw to zero.

pw = cash flow in year 0 + cash flow in year 1(p/f,i,n) + cash flow in year 2(p/f,i,n) + cash flow in year 3(p/f,i,n) +  cash flow in year 4(p/f,i,n) +  cash flow in year 5(p/f,i,n)

0 = - 900 + 600(p/f,i,1) + 500(p/f,i,2) + 400(p/f,i,3) + 300(p/f,i,4) + 200(p/f,i,5)

900 = 600(p/f,i,1) + 500(p/f,i,2) + 400(p/f,i,3) + 300(p/f,i,4) + 200(p/f,i,5)

solving via trial and error we get that i is between 43% and 44% and solving further we get that i is 43.49%

so 43 - 44% is the right answer.