Question

Suppose you purchased an income-producing property for $95,000 five years ago. In year 1, you were able to negotiate a lease that paid $10,000 per year at the end of each year. If you are able to sell the property at the end of year 5 for $100,000 (after receiving our final lease payment), what was the internal rate of return (IRR) on this investment?

Answer 1

Property
IRR is the rate at which NPV =0
IRR	0.113653057
Year	0	1	2	3	4	5
Cash flow stream	-95000	10000	10000	10000	10000	110000
Discounting factor	1	1.113653	1.240223	1.381178	1.5381534	1.712969
Discounted cash flows project	-95000	8979.457	8063.065	7240.195	6501.3021	64215.98
NPV = Sum of discounted cash flows
NPV Property =	4.68644E-08
Where
Discounting factor =	(1 + IRR)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor
IRR=	11.37%