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.
%

 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