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What is the IRR of the following set of cash flows?     Year Cash Flow 0...

What is the IRR of the following set of cash flows?

   

Year Cash Flow
0 –$11,768            
1 6,500            
2 5,400            
3 6,200            

24.09%

25.36%

26.63%

25.87%

24.85%

Solutions

Expert Solution

IRR is 25.36% as shown below
Statement showing Cash flows
Particulars Time PVf 25% Amount PV
Cash Outflows                              -                          1.00               (11,768.00)            (11,768.00)
PV of Cash outflows = PVCO            (11,768.00)
Cash inflows                         1.00                    0.8000                    6,500.00                5,200.00
Cash inflows                         2.00                    0.6400                    5,400.00                3,456.00
Cash inflows                         3.00                    0.5120                    6,200.00                3,174.40
PV of Cash Inflows =PVCI              11,830.40
NPV= PVCI - PVCO                      62.40
Statement showing Cash flows
Particulars Time PVf 26% Amount PV
Cash Outflows                              -                          1.00               (11,768.00)            (11,768.00)
PV of Cash outflows = PVCO            (11,768.00)
Cash inflows                         1.00                    0.7937                    6,500.00                5,158.73
Cash inflows                         2.00                    0.6299                    5,400.00                3,401.36
Cash inflows                         3.00                    0.4999                    6,200.00                3,099.42
PV of Cash Inflows =PVCI              11,659.51
NPV= PVCI - PVCO                  (108.49)
NPV at 25%                       62.40
NPV at 26%                  (108.49)
Difference at 1%= 62.40 - (108.49)                     170.89
IRR = 25% + 62.40/170.89*1%
IRR = 25.36%

jeff jeffy answered 1 year ago
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