Determine the IRR of the following cashflow. Invest wisely! MARR=10% Year $ 0 -1000 1 200...

Determine the IRR of the following cashflow. Invest wisely! MARR=10%

Year	$
0	-1000
1	200
2	-180
3	-180
4	-180
5	500
6	-180
7	-180
8	500

Solutions

Expert Solution

IRR = -12.62%

-----------------------------------------------------------------------------------------------------------------

Internal rate of return is the rate at which if we discount all the future cash flows, the resulting NPV will be zero, it is minimum rate of return that management seeks from the project, IRR of the asset/project must be greater than the required rate of return, otherwise it will not be feasible for the management to accept the project. Best way to calculate IRR is using Excel.

Year	Cash flow
0	-1000
1	200
2	-180
3	-180
4	-180
5	500
6	-180
7	-180
8	500
9	0
10	0
IRR	-12.62%
Formula	=IRR(J21:J31)

-----------------------------------------------------------------------------------------------------------------

Hope this answer your query.

Feel free to comment if you need further assistance. J

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Consider the following two projects: Project Year 0 Cashflow Year 1 Cashflow Year 2 Cashflow Year...

Consider the following two projects: Project Year 0 Cashflow Year 1 Cashflow Year 2 Cashflow Year 3 Cashflow Year 4 Cashflow Discount rate A -100 40 50 60 N/A .15 B -147 50 70 90 5 .15 An incremental IRR of Project B over Project A is _________%. (Please round to two decimal places, write the number only without "%". i.e. if the answer is "5%", write "5.00")

Consider the following cash flow profile and assume MARR is 10%/year. EOY NCF 0 $-95 1...

Consider the following cash flow profile and assume MARR is 10%/year. EOY NCF 0 $-95 1 $20 2 $20 3 $50 4 $-50 5 $50 6 $20 Determine the IRR for this project.

Compare the following three alternatives by the IRR method, given MARR of 8%/year. First find if...

Compare the following three alternatives by the IRR method, given MARR of 8%/year. First find if they are feasible and then compare them with the incremental rate of return method (DROR). Alt. Construction cost $ Benefits $/yr Salvage $ Service Life (yrs) A 510,000 145,000 10,000 5 B 775,000 155,000 15,000 9 C 1,075,000 165,000 20,000 11

Suppose the MARR is 5%. Use the following table to answer the question--The IRR on the...

Suppose the MARR is 5%. Use the following table to answer the question--The IRR on the CMS Investment is _______. CMS FMS Initial Investment $31,000 $38,000 Annual Revenue 6,688 9,102 Useful Life (Years) 5 5 A. 17.0% - 18.0% B. 5.0% - 6.0% C. 20.0% - 21.0% D. 2.0% - 3.0% E. 11.0% - 12.0%

year 0 year 1 year 2 year 3 year 4 cashflow for S -100 40 50...

year 0 year 1 year 2 year 3 year 4 cashflow for S -100 40 50 30 30 cashflow for L -100 10 10 50 90 If the company's cost of capital is 5% and the decision is made by choosing the project with the higher IRR, how much value will be forgone? a. $4.01 b. $20.80 c. $29.89 d. $1.79 e. $12.45

Consider the following cash flow profile, and assume MARR is 8percent/year. EOY 0 1 2 3...

Consider the following cash flow profile, and assume MARR is 8percent/year. EOY 0 1 2 3 4 5 6 NCF $-75 $11 $11 $11 $11 $11 $11 a. What does Descartes' rule of signs tell you about the IRR(s) of the project? b. What does Norstrom’s criterion tell us about the IRR(s) of this project? c. What is the IRR(s) for this project? d. Is this project economically attractive?

Suppose you invest $1000 in an account paying 10% interest per year.

Suppose you invest $1000 in an account paying 10% interest per year. How much will you have in the account in 7 years? in 20 years? in 75 years?

2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS PROJECT 1 PROJECT 2 YEAR CASHFLOW CASHFLOW...

2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS PROJECT 1 PROJECT 2 YEAR CASHFLOW CASHFLOW 1 $95,000 $112,000 2 $150,000 $95,000 3 $10,000 $85,000 4 $12,000 $65,000 5 $45,000 $10,000 6 $198,000 $15,000 BOTH PROJECTS HAVE A COST OF $275,000. THE COST OF CAPITAL IS 11.5%. A) Calculate the payback period for each project. State if payback is acceptable for each project and state why. B) Calculate the NPV for each project. State if NPV is acceptable for each...

1. What is the NPV of the following project? Year A 0 -1,000 1 200 2...

1. What is the NPV of the following project? Year A 0 -1,000 1 200 2 500 3 500 The WACC for the project is 10 percent.

Determine the IRR, to the nearets 1/10 percent, for an equipmentthat costs $250,000 and would...

Determine the IRR, to the nearets 1/10 percent, for an equipment that costs $250,000 and would provide positive cash flows of $100,000, $90,000, $80,000, and $20,000 at the end of each year for the next four years.Complete the problem by hand using linear interpolation (show all calculations used, not the excel document) and also solve using Excel (show full document please). Hint: Start at 5%

Subjects