Question
In: Finance
An investment project requires an initial outlay of $100,000, and is expected to generate annual cash...
An investment project requires an initial outlay of $100,000, and is expected to generate annual cash inflows of $28,000 for the next 5 years. The cost of capital is 12 percent. Determine the internal rate of return for the project (to the nearest tenth of one percent).
|
a. |
12.0% |
|
b. |
12.6% |
|
c. |
3.6% |
|
d. |
12.4% |
Solutions
Expert Solution
Let irr be x%
At irr,present value of inflows=present value of outflows.
100,000=28000/1.0x+28000/1.0x^2+28000/1.0x^3+28000/1.0x^4+28000/1.0x^5
Hence x=irr=12.4%(Approx)
jeff jeffy answered 2 years agoRelated Solutions
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