Question

"The initial investment for a project is $133,000. The project will last for 7 years and can be salvaged for $11,970 at the end of 7 years. The annual expenses for the project are $5,200 in year 1 and increase at an annual rate of 9% in each year of the project. Assume the annual revenue remains the same in each of the 7 years. What does the annual revenue need to be in order for the internal rate of return of the project to equal 14.9%? "

Answer 1

Year	0.00	1	2	3	4	5	6	7
Initial investment	133,000.00
Revenue		37,301.90	37,301.90	37,301.90	37,301.90	37,301.90	37,301.90	37,301.90
Annual expenses	Growing at 9%	5200	5,668.00	6,178.12	6,734.15	7,340.22	8,000.84	8,720.92
Salvage value								11,970.00
Net cash flow	-133,000.00	32,101.90	31,633.90	31,123.78	30,567.75	29,961.68	29,301.06	40,550.98
Internal rate of return	15%	Using IRR formula and above calculated cash flows
So using goal seek function in excel by setting value of IRR cell to 14.9 by changing revenue cell we get the answer
So Annual revenue	37,301.90