You've estimated the following cash flows (in $) for a project:
A | B | |
1 | Year | Cash flow |
2 | 0 | -5,100 |
3 | 1 | 1,325 |
4 | 2 | 2,148 |
5 | 3 | 2,742 |
The required return for the project is 8%.
Part 1
What is the IRR for the project?
IRR of the project is the rate for which the NPV of the project is zero
Method 1: IRR Calculation using Excel
IRR can be calculated using the IRR function in Excel as shown below:
=IRR(B2:B5) = 9.40070052%
Method 2: Using ba ii plus calculator
CF0 = -5100
C01 = 1325, F01 = 1
C02 = 2148, F02 = 1
C03 = 2742, F03 = 1
IRR -> CPT (Press IRR and then press CPT)
We get, IRR = 9.400700523
Answer -> IRR = 9.40% (Rounded to two decimal points)
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