Question

In: Finance

Project L costs $47,974.56, its expected cash inflows are $10,000 per year for 10 years, and...

Project L costs $47,974.56, its expected cash inflows are $10,000 per year for 10 years, and its WACC is 10%. What is the project's IRR? Round your answer to two decimal places.

Solutions

Expert Solution

Ans 16.21%

Year Project Cash Flows (i) DF@ 10% (ii) PV of Project A ( (i) * (ii) ) DF@ 20% (ii) PV of Project A ( (i) * (ii) )
0 -47974.56 1                    (47,974.56) 1        (47,974.56)
1 10000 0.909                       9,090.91 0.833            8,333.33
2 10000 0.826                       8,264.46 0.694            6,944.44
3 10000 0.751                       7,513.15 0.579            5,787.04
4 10000 0.683                       6,830.13 0.482            4,822.53
5 10000 0.621                       6,209.21 0.402            4,018.78
6 10000 0.564                       5,644.74 0.335            3,348.98
7 10000 0.513                       5,131.58 0.279            2,790.82
8 10000 0.467                       4,665.07 0.233            2,325.68
9 10000 0.424                       4,240.98 0.194            1,938.07
10 10000 0.386                       3,855.43 0.162            1,615.06
NPV                     13,471.11 NPV          (6,049.84)
IRR = Ra + NPVa / (NPVa - NPVb) * (Rb - Ra)
10% + 13471.11 / (13471.11 + 6049.84 )*10%
16.21%

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