A project does not necessarily have a unique IRR. (Refer to the previous problem for more information on IRR.) Show that a project with the following cash flows has two IRRs: year 1, -$20; year 2, $82; year 3, -$60; year 4, $2. (Note: It can be shown that if the cash flow of a project changes sign only once, the project is guaranteed to have a unique IRR.)
(Reference Problem 44)
The IRR is the discount rate r that makes a project have an NPV of $0. You can find IRR in Excel with the built-in IRR function, using the syntax =IRR(range of cash flows). However, it can be tricky. In fact, if the IRR is not near 10%, this function might not find an answer, and you would get an error message. Then you must try the syntax =IRR(range of cash flows, guess), where “guess” is your best guess for the IRR. It is best to try a range of guesses (say, -90% to 100%). Find the IRR of the project described in Problem 34.
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