Must show all work and be in EXCEL format-formulas must be shown
Frenchies, Inc. is considering a major investment. The investment will have an initial cost of $630,000 and will be depreciated straight-line to a zero book value over the life of the project. The cash inflows generated by the project are estimated at $255,000 for the first three years and $25,000 for the following five years. What is the internal rate of return?
IRR is to be calculated in excel bu formula
=IRR(values,[guess])
IRR = 15.60%
Year | Cashflow |
0 | -630000 |
1 | 255000 |
2 | 255000 |
3 | 255000 |
4 | 25000 |
5 | 25000 |
6 | 25000 |
7 | 25000 |
8 | 25000 |
IRR | 15.60% |
I hope this clear your doubt.
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Note- Cash Inflows are given after treatment of Depreciation amount
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