An investment requires an initial cash outflow of $5,100, and it will bring in cash inflows...

An investment requires an initial cash outflow of $5,100, and it will bring in cash inflows of $2,700, $1,500, $2,600, $2,700, for the next four years, respectively. What is the internal rate of return (IRR) of this project? (Format answer to percent and rounded to two decimals, enter your answers without %, for example, for answer 0.1243, enter 12.43 only)

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Expert Solution

The IRR is the interest rate that makes the NPV of the project equal to zero. So, the equation that defines the IRR for this project is:

0 = -$5,100 + $2,700/(1 + IRR) + $1,500/(1 + IRR)^2 + $2,600/(1 + IRR)^3 + $2,700/(1 + IRR)^4

IRR = 29.92%

jeff jeffy answered 2 years ago

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