Question

A project is estimated to cost $191,850 and provide annual net cash flows of $50,000 for...

A project is estimated to cost $191,850 and provide annual net cash flows of $50,000 for eight years.

Present Value of an Annuity of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 1.833 1.736 1.690 1.626 1.528
3 2.673 2.487 2.402 2.283 2.106
4 3.465 3.170 3.037 2.855 2.589
5 4.212 3.791 3.605 3.352 2.991
6 4.917 4.355 4.111 3.784 3.326
7 5.582 4.868 4.564 4.160 3.605
8 6.210 5.335 4.968 4.487 3.837
9 6.802 5.759 5.328 4.772 4.031
10 7.360 6.145 5.650 5.019 4.192

Determine the internal rate of return for this project, using the Present Value of an Annuity of $1 at Compound Interest table shown above.
%

Homework Answers

Answer #1
Particulars PV@6% PV@10% PV@12% PV@15% PV@20%
Gross total upto 8 Year from Given table 6.21 5.335 4.968 4.487 3.837
Internal rate of Return =
NPV of Cash flow= Initial value of cash outflow
on the basis of Trial and run method
Cash Out flow initialy 191850.00
Cash inflow every year 50000
So, 191850/50000
3.837
Ans hence IRR= 20%
Cash Inflow in 8 year = 50000 x 3.837 191850
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