A four year project that has an initial cost of $60,000. The future cash inflows are...

A four year project that has an initial cost of $60,000. The future cash inflows are $40,000 00,$30,000,$20,000, and $10,000, respectively Given this informationwhat what is the IRR for?

Solutions

Expert Solution

Year	Cash Flow	PV Factor @ 31%	Present Value	PV Factor @ 32%	Present Value
0	$ -60,000.00	1	$ -60,000.00	1	$ -60,000.00
1	$ 40,000.00	0.76336	$ 30,534.35	0.75758	$ 30,303.03
2	$ 30,000.00	0.58272	$ 17,481.50	0.57392	$ 17,217.63
3	$ 20,000.00	0.44482	$ 8,896.44	0.43479	$ 8,695.77
4	$ 10,000.00	0.33956	$ 3,395.59	0.32939	$ 3,293.85
			$ 307.87		$ -489.71

Unsing Hit and Trial method,

IRR = 31% + [$307.87 / ($307.87 + $489.71)]

= 31% + ($307.87 / $797.59)

= 31% + 0.386%

= 31.386%

(Using IRR function in excel, the IRR is 31.383%)

If you have any doubt or require any explanation, feel free to ask in comment section.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

The following four-year project has an initial cost of $1,000,000. The future cash inflows for the...

The following four-year project has an initial cost of $1,000,000. The future cash inflows for the next four years are $600,000, $500,000, $400,000, and $400,000, respectively. If the rate of return is 12%, determine the discounted payback period for this project.

A project has an initial cost of $60,000, expected net cash inflows of $14,000 per year...

A project has an initial cost of $60,000, expected net cash inflows of $14,000 per year for 7 years, and a cost of capital of 13%. What is the project's discounted payback period? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places. years

A four-year financial project is forecast to have net cash inflows of $10,000; $25,000; $60,000; and...

A four-year financial project is forecast to have net cash inflows of $10,000; $25,000; $60,000; and $50,000 in the next four years. It will cost $125,000 to implement the project payable at the beginning of the project. The discount rate is 11%. What is the NPV of this project? What is the BCR of this project? Based on the NPV and BCR, would you do this project? What is the NPV of the project if the cost is due in...

A project has an initial cost of $350. The project has annual cash inflows of $200,...

A project has an initial cost of $350. The project has annual cash inflows of $200, $160, $100, and $150, for the next four years, respectively. The discount rate is 25%. What is the discounted payback period of the project? a. the project never pays back b. 1 year c. 2 years d. 3 years e. 4 years

A project has an initial cost of $148,400 and is expected to produce cash inflows of...

A project has an initial cost of $148,400 and is expected to produce cash inflows of $56,500, $69,540, and $97,867 over the next three years, respectively. What is the discounted payback period if the required rate of return is 10 percent? A. 2.12 years B. 2.54 years C. 2.91 years D. 1.88 years

A project has an initial cost of $70,000, expected net cash inflows of $15,000 per year...

A project has an initial cost of $70,000, expected net cash inflows of $15,000 per year for 10 years, and a cost of capital of 12%. What is the project's PI? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places.

A project has an initial cost of $50,000, expected net cash inflows of $8,000 per year...

A project has an initial cost of $50,000, expected net cash inflows of $8,000 per year for 12 years, and a cost of capital of 13%. What is the project's MIRR? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places.

A project has an initial cost of $48,650, expected net cash inflows of $11,000 per year...

A project has an initial cost of $48,650, expected net cash inflows of $11,000 per year for 7 years, and a cost of capital of 11%. What is the project's payback period? Round your answer to two decimal places.

A project has an initial cost of $58,975, expected net cash inflows of $12,000 per year...

A project has an initial cost of $58,975, expected net cash inflows of $12,000 per year for 11 years, and a cost of capital of 10%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round your intermediate calculations. Round your answer to the nearest cent.

A project has an initial cost of $42,350, expected net cash inflows of $8,000 per year...

A project has an initial cost of $42,350, expected net cash inflows of $8,000 per year for 8 years, and a cost of capital of 13%. What is the project's PI? Do not round your intermediate calculations. Round your answer to two decimal places.

Subjects