Question

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.
%

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