Question

Compute the IRR on the following cash flow streams: a. An initial investment of $28,962 followed by a single cash flow of $40,390 in year 6. (Round intermediate calculations to 4 decimal places, e.g. 1.2512 and final answer to 2 decimal places, e.g. 15.25%.) IRR b. An initial investment of $988,597 followed by a single cash flow of $1,565,600 in year 4. (Round intermediate calculations to 4 decimal places, e.g. 1.2512 and final answer to 2 decimal places, e.g. 15.25%.) IRR c. An initial investment of $1,645,677 followed by cash flows of $1,317,700 and $1,067,000 in years 2 and 4, respectively. (Round answer to 2 decimal places, e.g. 15.25%.) IRR

Answer 1

a THE IRR IS :

CF0 = ($28,962)

CF6 = $40,390

IRR = 5.6998%

= 5.7%

IRR can be also be calculated  as ,IRR is the rate at which the NPV is zero,

($28,962) + $40,390/ (1 +IRR)^6 = 0

B. Similarly,

CF0 = ($988,597)

CF4 = $1,565,600

The IRR is = 12.18%

C. CF0 = ($1,645,677)

CF2 = $1,317,700

CF4 = $1,067,000

So, the IRR is = 14%