If an investor pays $10,000 for an investment today that is anticipated to produce net sale...

If an investor pays $10,000 for an investment today that is anticipated to produce net sale proceeds of $28,300 at end of year 10, what is the anticipated IRR?

Expert Solution

Summary : To calculate IRR of an investment with given data of Initial principal amount of $10000, time = 10 years and Amount after 10 years = 28300$

Answer : Formula :

amount = Principal ( 1+ rate of return )^ no. of years

28300= 10000( 1 + r ) ^ 10

28300 / 10000 = (1 + r) ^10

2.8300 = (1 + r)^ 10

10th root of 2.8300 = 1 + r

1.1096 = 1 + r

r = 1.1096 - 1= 0.1096

So, the anticipated IRR of the investment is 10.96%

jeff jeffy answered 2 years ago

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