Question

Arc Real Estate Company is planning to invest in a new development. The cost of the project will be $23 million and is expected to generate cash flows of $14,000,000, $11,750,000, and $6,350,000 over the next three years. The company's cost of capital is 20 percent. What is the internal rate of return on this project? (Round to the nearest percent.) HINT: Use a financial calculator or the Excel function: =IRR(values,[guess])?

Answer 1

IRR(cashflow_amounts, [rate_guess]) =22%

Example

IRR(A2:A25, 1%)

Summary

Calculates the internal rate of return on an investment based on a series of periodic cash flows.

cashflow_amounts

An array or range containing the income or payments associated with the investment.

rate_guess - [optional]

An estimate for what the internal rate of return will be.

EIRR(C3:06) ARC REAL ESTATE Year Cost Of Capital 20% O 1 2 $23,000,000 $14,000,000 $11,750,000 $6,350,000 IRR 22%!

=IRR(C3:06 ARC REAL ESTATE Year 20% 0 1 2 3 $23,000,000 Cost Of Capital $14,000,000 $11,750,000 $6,350,000 22% X =IRR(C3C6 IRR (cashflow_amounts, Crate_guess]) AX Example IRR (A2:A25, 1%) IRR Summary Calculates the internal rate of return on an investment based on a series of periodic cash flows. cashflow_amounts An array or range containing the income or payments associated with the investment. rate_guess - (optional] An estimate for what the internal rate of return will be. Learn more about IRR