In: Finance
You are considering a safe investment opportunity that requires a $870 investment today, and will pay $540 two years from now and another $640 five years from now.
a. What is the IRR of this investment?
IRR using excel is 9.02%
Year | Cash flow | × factor@ 9.02% | Present value |
0 | $ (870.00) | 1.0000 | $ (870.00) |
1 | $ - | 0.9173 | $ - |
2 | $ 540.00 | 0.8414 | $ 454.34 |
3 | $ - | 0.7718 | $ - |
4 | $ - | 0.7079 | $ - |
5 | $ 640.00 | 0.6493 | $ 415.57 |
$ - | |||
NPV | 3.8876 | $ (0.08) |
Answer is 9.02%