Your father LeBron paid $230,000 for an investment that promises to pay $4,500 at the end of each of the next 5 years, t...
Your father LeBron paid $230,000 for an investment that promises to pay $4,500 at the end of each of the next 5 years, then an additional lump sum payment of $25,500 at the end of the 6th year. What is the expected rate of return (IRR) on this investment? Solve without Excel, please include equations and steps.
Homework Answers
Investment Value = $ 230000, Annual Payments = $ 45000, Annual Payment Tenure = 5 years, Lump Sum Payment = $ 25500 in the 6th Year
Let the IRR be r
Therefore, 230000 = 45000 x (1/r) x [1-{1/(1+r)^(5)}] + 25500 / (1+r)^(6)
Using EXCEL's Goal Seek Function/hit and trial method/a financial calculator to solve the above equation, we get:
r = 0.02644 or 2.644 % ~ 2.64 %
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Your father LeBron paid $230,000 for an investment that promises to pay $4,500 at the end of each of the next 5 years, t...
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Your father LeBron paid $230,000 for an investment that promises to pay $4,500 at the end of each of the next 5 years, then an additional lump sum payment of $25,500 at the end of the 6th year. What is the expected rate of return (IRR) on this investment? Solve without Excel.
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