What is the discount rate for the following cash flows? (Please show your calculation procedure) Year...

Question

Question

What is the discount rate for the following cash flows? (Please show your calculation procedure)

Year 0 -4000

Year 1 1000

Year 2 0

Year 3 1000

Year 4 2000

Year 5 2000

Answer 1

Answer #1

The question is solved using the internal rate of return method.

Internal rate of return is calculated using a financial calculator by inputting the below:

Press the CF button.
CF0= -$4,000. It is entered with a negative sign since it is a cash outflow.
Cash flow for each year should be entered.
Press Enter and down arrow after inputting each cash flow.
After entering the last cash flow cash flow, press the IRR and CPT button to get the IRR of the project.

The IRR of project is 12.09%.

Therefore, the discount rate is 12.09%.

In case of any query, kindly comment on the solution.

Answer 2

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