A five-year project requires an investment of -177 and has the following cash flows in years...

A five-year project requires an investment of -177 and has the following cash flows in years 1 through 5, respectively (all cash flows in dollars): 116, -109, 267, 2, and 108. Without actually calculating any IRR, what is the maximum possible value any of the real IRRs could have? Give your answer as a percent with two decimals; e.g., 23.24

The answer is 150.85. I would like to understand why.

Thanks!

Expert Solution

SEE MATHEMATICALLY WE CAN HAVE 2 IRRS. BUT ONLY ONE OF THEM IS CORRECT.

MATHEMATICALLY WE FORM QUADRATIC EQUATION LIKE : AX² + BX + C, WHICH MAY GIVE US 2 VALUES.

HERE, ALSO THERE WILL BE 2 VALUES

SO INSTEAD OF IRR, WE SHOULD CONCENTRATE ON NPV OR MARR

WHICH WILL GIVE US CORRECT DECISION

I AM ATTACHING A EXCEL SHEET IMAGE, WILL CLEAR YOUR DOUBTS

jeff jeffy answered 2 years ago

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