Question

commute the irr static for a project e the appropriate cost of capital is 9%

commute the irr static for project e the appropriate cost of capital is 9%, project e time cash flow minus 1200 $430 $540 $560 $340 $140 the irr is

Answer 1

IRR :
IRR is the Rate at which PV of Cash Inflows are equal to PV of Cash Outflows or Rate of growth is expected from project/ Investment. At IRR, NPV of Project/ Investment will be Zero.
It assumes that intermediary Cfs are reinvested at IRR only.

IRR = Rate at which least +ve NPV + [ NPV at that Rate / Change in NPV due to 1% inc in disc rate ] * 1%

If IRR > Cost of Capital - Project can be accepted
IRR = Cost of Capital - Indifferebce Point - Project will be accepted / Rejected
IRR < Cost of Capital - Project will be erejected

Year	CF	PVF @23 %	Disc CF	PVF @24 %	Disc CF
0	$         -1,200.00	1.0000	$         -1,200.00	1.0000	$         -1,200.00
1	$             430.00	0.8130	$             349.59	0.8065	$             346.77
2	$             540.00	0.6610	$             356.93	0.6504	$             351.20
3	$             560.00	0.5374	$             300.93	0.5245	$             293.71
4	$             340.00	0.4369	$             148.55	0.4230	$             143.81
5	$             140.00	0.3552	$                49.73	0.3411	$                47.76
NPV			$                  5.73		$              -16.75

IRR = Rate at which least +ve NPV + [ NPV at that rate / Change in NPV due to Inc of 1% in Int Rate ] * 1%
= 23 % + [ 5.73 / ( 5.73 - ( -16.75) ) ] * 1 %
= 23 % + [ 5.73 / ( 22.48) ] * 1 %
= 23 % + [ 0.25 ] * 1 %
= 23 % + 0.25 %
= 23.25 %