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A project has the following cash flows: Year Cash Flows 0 -2,500 1 750 2 800...

A project has the following cash flows:

Year Cash Flows
0 -2,500
1 750
2 800
3 500
4 400
5 300
6 250

What is the Internal Rate of Return (IRR) of this project?

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Answer #1

Let irr be x%
At irr,present value of inflows=present value of outflows.

2500=750/1.0x+800/1.0x^2+500/1.0x^3+400/1.0x^4+300/1.0x^5+250/1.0x^6

Hence x=irr=6.90%(Approx).

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