What is the IRR for the following project if its initial after-tax cost is $5,000,000 and...

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What is the IRR for the following project if its initial after-tax cost is $5,000,000 and...

What is the IRR for the following project if its initial after-tax cost is $5,000,000 and it is expected to provide after-tax operating cash flows of $1,500,000 in year 1, $2,900,000 in year 2, $2,700,000 in year 3 and $2,300,000 in year 4?

Group of answer choices

19.47%

28.93%

12.05%

7.56%

business finance

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Answer 1

Answer #1

Let the IRR be x.

Now , Present Value of Cash Outflows=Present Value of Cash Inflows

5,000,000= 1,500,000/(1.0x) +2,900,000/ (1.0x)^2 +2,700,000/(1.0x)^3+ $ 2,300,000/(1.0x)^4

Or x= 28.932%

Hence the IRR is 28.93%

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Answer 2

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