Bruges Industries is considering a project with an initial cost of $214,758 and with the following...

Bruges Industries is considering a project with an initial cost of $214,758 and with the following incremental after-tax cash inflows: Year 1, $65,079; Year 2, $79,532; and Year 3, $108,741. What is the internal rate of return (IRR) of this project?

Expert Solution

Ans 8.00%

Year	Project Cash Flows (i)	DF@ 5%	DF@ 5% (ii)	PV of Project ( (i) * (ii) )	DF@ 10% (iii)	PV of Project ( (i) * (iii) )
0	-214758	1	1	(2,14,758.00)	1	(2,14,758.00)
1	65079	1/((1+5%)^1)	0.952381	61,980.00	0.909	59,162.73
2	79532	1/((1+5%)^2)	0.907029	72,137.87	0.826	65,728.93
3	108741	1/((1+5%)^3)	0.863838	93,934.56	0.751	81,698.72
		NPV	13,294.43	NPV	(8,167.62)

	IRR =	Ra + NPVa / (NPVa - NPVb) * (Rb - Ra)
		5% + 13294.43/ (13294.43 + 8167.62)*5%
		8.00%

jeff jeffy answered 2 years ago

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