What is the internal rate of return for the following set of cash flows? Year 0:...
What is the internal rate of return for the following set of cash flows?
Year 0: initial capital investment of $2.8 million
Year 1: net incremental cash flow of $500,000
Year 2: $750,000
Year 3: $950,000
Year 4: $1.5 million
Year 5: $1.8 million
Homework Answers
21.73%
| Internal rate of return is the rate at which net present value of project is zero. | ||||
| Year | Cash Flow | |||
| 0 | $ -28,00,000 | |||
| 1 | 5,00,000 | |||
| 2 | 7,50,000 | |||
| 3 | 9,50,000 | |||
| 4 | 15,00,000 | |||
| 5 | 18,00,000 | |||
| Internal rate of return (IRR) | = | =irr(D4:D9) | ||
| = | 21.73% | |||
| Note: | ||||
| D4:D9 is the range of cash flows from year 0 to 5 . | ||||
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