Question

i need to know how to ger the 13% = IRR. pls show step by step as i have been trying to solve and unable to get the 13%.

Calculate 609201 $200,000 $300,000 $300,000 $200,000 $200,000 $160.000 (1+IRR) (1+ IRR) (1+ IRR) (1+ IRR)* (1+IRR) (1+IRR) By trail and error, IRR=13% Therefore, IRR on the project is 13%

Answer 1

Trial and error is u have to keep making guess and zeroing on the correct IRR

We will start with a random number and calculate Right Hand Side RHS. If it comes larger than LHS 927917 , Increase the IRR otherwise decrease the IRR. Continue the process till RHS=LHS=927917

Try with IRR=10%

RHS=200000/1.1+300000/1.1^2+300000/1.1^3+200000/1.1^4+200000/1.1^5+160000/1.1^6=1006249.291

As this is more than 927917

Increase IRR to 15%

RHS=200000/1.15+300000/1.15^2+300000/1.15^3+200000/1.15^4+200000/1.15^5+160000/1.15^6=880969.4249

As this is less than 927917

Decrease IRR to 13

RHS=200000/1.13+300000/1.13^2+300000/1.13^3+200000/1.13^4+200000/1.13^5+160000/1.13^6=927916.9013

Stop the process as we have reached the value

So IRR=13%