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In: Economics

Determine the rate of return for this project. Year 0 1 2 3 4 5 Cash...

Determine the rate of return for this project.

Year 0 1 2 3 4 5
Cash flow -$12,300 $4000 $4000 $3000 $3000 $3000

14.21%

12.75%

13.11%

13.85%

Solutions

Expert Solution

Ans. 12.75%

Here, 3000 is for year 1&2, 1000 is for year 3 to 5 & PW of Cost = 12300

Now,

PW of Cost = PW of Benefits

By trial and error method:

If i = 12%:

If i = 15%:

Now, by interpolation method:

Rahul Sunny answered 2 years ago
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