In: Finance
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.
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% |