Take a look at Q9, and determine the IRR of this. You can use excel, but show both your yearly values and the indicate which cells the IRR function is used on for full marks.
Q9 You’re considering purchasing a franchise for an old hardware store and operating it for 5 years. In order to purchase the store, you need to pay $93,782.8 for the property as well as $15,733.5 of back taxes (they were due a year ago, and were not paid by the previous owner). To run the store for 5 years, will cost you $51340 per year, and there will be a yearly tax that you need to pay of $5240. In exchange, you will get a yearly income from the store of 83,512.2. At the end of 5 years, you can expect to be able to sell the store for $205,232.5 . What is the annual worth of owning this business (assuming you buy and sell it over the 5 year period if your cost of capital is 5%?
Type the answer to this in the box below and upload your work and cash flow diagram as part of your assignment submission.
ANS: (38,781.02)
Calculation of IRR
Year | Cash Flows |
0 | $ (109,516.30) |
1 | $ 26,932.20 |
2 | $ 26,932.20 |
3 | $ 26,932.20 |
4 | $ 26,932.20 |
5 | $ 232,164.70 |
IRR | 34% |
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