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An investment that Kevin is considering offers the following cash flows. Year 1 Initial investment of...

An investment that Kevin is considering offers the following cash flows.

Year 1 Initial investment of $10,000

Year 2 Inflow of $2,000

Year 3 Inflow of $1,500

Year 4 Additional investment of $5,000

Year 5 Inflow of $1,200

Year 6 Inflow of $2,200

Year 7 Inflow of 1,500

Year 8 Inflow of $1,000

Year 9 Inflow of $1,200

Year 10 Sale proceeds of $17,000

5. What is the internal rate of return (IRR) that this investment offers if all cash flows occur at the end of each period?

a. 10.10%

b. 10.87%

c. 9.24%

d. 9.74%.

Expert Solution

	10.8700%
Cash flows	Year	Discounted CF
-	0	0.00
(10,000.00)	1	-9019.57
2,000.00	2	1627.05
1,500.00	3	1100.65
(5,000.00)	4	-3309.13
1,200.00	5	716.33
2,200.00	6	1184.51
1,500.00	7	728.44
1,000.00	8	438.01
1,200.00	9	474.08
17,000.00	10	6057.71

IRR = 10.87% (use IRR function in Excel)

jeff jeffy answered 1 year ago

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