A project costs $164 today. if a cash flow of $231 will be received at the...
A project costs $164 today. if a cash flow of $231 will be received at the end of seven years, what is its IRR?
keep two decimal places
Homework Answers
Ans 5.02%
| Year | Project Cash Flows (i) | DF@ 10% | DF@ 10% (ii) | PV of Project ( (i) * (ii) ) | DF@ 5% (iii) | PV of Project ( (i) * (iii) ) |
| 0 | -164 | 1 | 1 | (164.00) | 1 | (164.00) |
| 1 | 0 | 1/((1+10%)^1) | 0.909 | - | 0.952 | - |
| 2 | 0 | 1/((1+10%)^2) | 0.826 | - | 0.907 | - |
| 3 | 0 | 1/((1+10%)^3) | 0.751 | - | 0.864 | - |
| 4 | 0 | 1/((1+10%)^4) | 0.683 | - | 0.823 | - |
| 5 | 0 | 1/((1+10%)^5) | 0.621 | - | 0.784 | - |
| 6 | 0 | 1/((1+10%)^4) | 0.564 | - | 0.746 | - |
| 7 | 231 | 1/((1+10%)^5) | 0.513 | 118.54 | 0.711 | 164.17 |
| PV | (45.46) | NPV | 0.17 | |||
| IRR = | Ra + NPVa / (NPVa - NPVb) * (Rb - Ra) | |||||
| 10% -45.46 / (45.46 + 0.17)*5% | ||||||
| 5.02% | ||||||
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