Find the IRR of the following cash flows: Year Cash Flow 0 $-2,500 1 $1,100 2...

Question

Question

Find the IRR of the following cash flows:

Enter your answer as a percentage rounded to two decimal places (e.g., 5.64%).

Answer 1

Answer #1

IRR is the rate of return that makes present value of cash inflows equal to initial investment

2,500 = 1,100 / (1 + R)¹ + 2,500 / (1 + R)² + 1,000 / (1 + R)³ + 3,000 / (1 + R)⁴

Using trial and error method, i.e., after trying various values for R, let's try R as 56.07%

2,500 = 1,100 / (1 + 0.5607)¹ + 2,500 / (1 + 0.5607)² + 1,000 / (1 + 0.5607)³ + 3,000 / (1 + 0.5607)⁴

2,500 = 2,500

Therefore, IRR is 56.07%

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Answer 2

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