Question

In: Finance

Find the internal rate of return (IRR) of a project that costs $10,000 and brings net revenue of $8,000 each year for two consecutive years.


Find the internal rate of return (IRR) of a project that costs $10,000 and brings net revenue of $8,000 each year for two consecutive years.

Solutions

Expert Solution

 

Initial Investment = $10,000
Annual Revenue = $8,000
Period = 2 years

Let IRR be i%

NPV = -$10,000 + $8,000 * PVA of $1 (i%, 2)
0 = -$10,000 + $8,000 * PVA of $1 (i%, 2)

Using financial calculator:
N = 2
PV = -10000
PMT = 8000
FV = 0

I = 37.98%

IRR of the project is 37.98%

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Internal Rate of Return (IRR) IRR Project L costs $48,422.38, its expected cash inflows are $10,000...
Internal Rate of Return (IRR) IRR Project L costs $48,422.38, its expected cash inflows are $10,000 per year for 10 years, and its WACC is 13%. What is the project's IRR? Round your answer to two decimal places. ——-%
What is the internal rate of return (IRR) of a project costing $3,000 (at year 0);...
What is the internal rate of return (IRR) of a project costing $3,000 (at year 0); having after-tax cash flows of $1,500 in each of the two years of its two-year life; and a salvage value of $600 at the end of the second year in addition to the $1,500 cash flow? 13.21% 17.23% 16.06% 12.32%
What is the internal rate of return (IRR) of the previous project? Year Cash flow 0...
What is the internal rate of return (IRR) of the previous project? Year Cash flow 0 -$100,000 (it is minus!) 1    $20,000 2    $50,000 3    $30,000 4    $40,000 A. 13.98% B. 15.98% C. 12.98% D. 11.98% E. 14.98%
If you compare the internal rate of return to the net present value, the IRR is...
If you compare the internal rate of return to the net present value, the IRR is more reliable when you are evaluating mutually exclusive projects. the IRR is easier to apply when the cash flows are non-normal. they are very similar because the IRR is the discount rate that makes the NPV equal to one. will provide the same accept or reject answer unless you have scale differences between projects. will provide the same accept or reject answer if you...
How do net present value (NPV) and internal rate of return (IRR) relate to each other...
How do net present value (NPV) and internal rate of return (IRR) relate to each other mathematically? How does modified internal rate of return (MIRR) compare to internal rate of return (IRR)?
The company's CFO remembers that the internal rate of return (IRR) of Project Lambda is 13.2%
Last Tuesday, Cute Camel Woodcraft Company lost a portion of its planning and financial data when its server and it backup server crashed. The company's CFO remembers that the internal rate of return (IRR) of Project Lambda is 13.2%, but he can't recall how much Cute Camel originally invested in the project nor the project's net present value (NPV). However, he found a note that contained the annual net cash flows expected to be generated by Project Lambda. They are: The...
What is the internal rate of return (IRR) of this project given the following cash flows?...
What is the internal rate of return (IRR) of this project given the following cash flows? Year                 CF 0                -$9,800 1                   $1,000 2                   $4,500 3                   $1,000 4                   $1,500 5                   $1,700 6                   $2,700 Convert your answer to percentage and round off to two decimal points. Do not enter % in the answer box.
3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return...
3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to make capital budgeting decisions. Consider the case of Cute Camel Woodcraft Company: Last Tuesday, Cute Camel Woodcraft Company lost a portion of its planning and financial data when both its main and its backup servers crashed. The company’s CFO remembers that the internal rate of return (IRR) of Project Gamma is...
3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return...
3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to make capital budgeting decisions. Consider the case of Blue Hamster Manufacturing Inc.: Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of its planning and financial data when both its main and its backup servers crashed. The company’s CFO remembers that the internal rate of return (IRR) of Project Delta is...
The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are...
The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to make capital budgeting decisions. Consider the case of Cold Goose Metal Works Inc.: Last Tuesday, Cold Goose Metal Works Inc. lost a portion of its planning and financial data when both its main and its backup servers crashed. The company’s CFO remembers that the internal rate of return (IRR) of Project Omicron is 13.2%, but he can’t...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT