Question

Company invested $2.4 million in a process that resulted in net profits of a $760,00 per year for 5 consecutive years. Find rate of return.

Answer 1

We can write down the cash flow and then find the internal rate of return
	Year	0	1	2	3	4	5
	Cash flow	-2400000	760000	760000	760000	760000	760000
	Using excel we can find the internal rate of return
	Internal rate of return (IRR)			17.57%

IRR is the rate of return for which net present value is zero.  In other words, the rate of return for which the profits will recover the initial investment.

Therefore the rate of return = 17.57%