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What is the internal rate of return for the following set of cash flows? Year 0:...

What is the internal rate of return for the following set of cash flows?

Year 0: initial capital investment of $2.8 million

Year 1: net incremental cash flow of $500,000

Year 2: $750,000

Year 3: $950,000

Year 4: $1.5 million

Year 5: $1.8 million

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Answer #1

21.73%

Internal rate of return is the rate at which net present value of project is zero.
Year Cash Flow
0 $       -28,00,000
1                5,00,000
2                7,50,000
3                9,50,000
4             15,00,000
5             18,00,000
Internal rate of return (IRR) = =irr(D4:D9)
= 21.73%
Note:
D4:D9 is the range of cash flows from year 0 to 5 .
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