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) Compute the internal rate of return (IRR) for the following cash flows. Show the equation...

) Compute the internal rate of return (IRR) for the following cash flows. Show the equation used using Appendix C notation: (Chapter 7)

Year   Alt A
0   -$2,217
1   $0
2   $0
3   $500
4   $700
5   $900
6   $1,100

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Answer #1

Answer

Given Cash flow

Year Cash flow CFi
0 -2217
1 0
2 0
3 500
4 700
5 900
6 1100

Ler r be the IRR

CF0 + Cf1/(1+r)^1+ Cf2/(1+r)^2+ Cf3/(1+r)^3+ Cf4/(1+r)^4+ Cf5/(1+r)^5+ Cf6/(1+r)^6=0

-2217+0/(1+r)+0/(1+r)^2+500/(1+r)^3+700/(1+r)^4+900/(1+r)^5+1100/(1+r)^6=0

Solving for r we get r =8.00%

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