Maggie green just borrow $5000. she is planning on to pay it back in 5 equal...
Homework Answers
Borrowed amount = $5000
Time = 5 years
Value of each instalment = $1200
Let, IRR = R
5000 = 1200*(1-1/(1+R)^5)/R
At R = 6%
Present Value loan payment = $5054.84
At R = 7%
Present Value loan payment = $4920.24
As per the method of interpolation,
R = 6% + ((5054.84-5000)/(5054.84-4920.24))*(7%-6%)
R = 6.4%
So, IRR is 6.4%
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