Question

(IRR of uneven cash-flow stream) Microwave Oven Programming, Inc. is considering the construction of a new plant. The plant will have an initial cash outlay of $15 million, and will produce cash flows of $5 million at the end of year 1, $6 million at the end of year 2, and $4 million at the end of year 3 through 5. What is the internal rate of return on this new plant?

Answer 1

Initial cash outlay. - $ 15 million Assume discounted cashflows @ 17% NPU = Initial Investment & present value of discounted cash flows. p.v of Discounted cashflows chi (Ho) t cf2 Cifra ..-t can Citron $5m + & 6M + $um & cum + $um (1.17)² (119) (12) (117) = $4.2735042735 + $4.38308150615+ $ 2.49748222572 + $2.13460019292 + $ 1.82 uu4460933 = $15.1131126075 MPU =-$15+ $15:1131126075 = $ 0.1131126075 Assume Discounted cashflows @ 18% $4 = $50 $6 Cl·18)! C1-18) C118) + $4 C1-18)4 (118) = $4.93798813559 + $4.30910657856 + $9.43452349071 + $2.0631555006 t $ 1.74843686491