You purchase an asset today for $895. The assets gives the cash-flows shown below. Assuming the IRR stays constant, what is the percentage capital gain/loss from today to period 1 for this asset? Time Period 0 1 2 3 Cash-Flow $100 $100 $100 $1000
3.22%
3.57%
3.39%
2.88%
Present Value of Cash Inflow =
Let the Rate be 11%
Present Value of Cash Inflow =
= 903.102445688
Let the Rate be 12%
Present Value of Cash Inflow =
= 875.701205224
IRR lies between 11% and 12%
IRR =
= 11% + ((903.102445688 - 895) / (903.102445688 - 895) + (895 - 875.701205224 )) * (12-11)
= 11% + (8.102445688 / (8.102445688) + (19.298794776)) * 1
= 11% + (8.102445688 / 27.401240464) * 1
= 11% + 0.29569630975
= 11.30%
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