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You purchase machinery for $20,000 that generates after-tax cash flows of $7,500 annually for the next 4 years. The cost of c
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Answer #1
Project
IRR is the rate at which NPV =0
IRR 0.184504885
Year 0 1 2 3 4
Cash flow stream -20000 7500 7500 7500 7500
Discounting factor 1 1.184505 1.403052 1.661922 1.9685544
Discounted cash flows project -20000 6331.759 5345.49 4512.848 3809.9023
NPV = Sum of discounted cash flows
NPV Project = 1.37225E-06
Where
Discounting factor = (1 + IRR)^(Corresponding period in years)
Discounted Cashflow= Cash flow stream/discounting factor
IRR= 18.5%
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