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A project has the following cash flows. What is the internal rate of return? THE ANSWER...

A project has the following cash flows. What is the internal rate of return? THE ANSWER IS 21.32% PLEASE SHOW WORK WITHOUT USING EXCEL

YEAR 0 1 2 3

NET INCOME -$390,000 $168,000 $190,000 $218,600

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Homework Answers

Answer #1

Solution:-

To Calculate Internal Rate of Return -

IRR is the rate where NPV is zero.

NPV = Present Value of Cash Inflow - Present Value of Cash outflow.

Let R = 20%

NPV =

NPV = $1,68,000 * 0.8333 + $1,90,000 * 0.6944 + $2,18,600 * 0.5787 - $3,90,000

NPV = $8,449.07

Let R = 25%

NPV =

NPV = $1,68,000 * 0.800 + $1,90,000 * 0.640 + $2,18,600 * 0.512 - $3,90,000

NPV = -$22,076.80

Formula of Internal Rate of Return -

IRR =

IRR =

IRR = 21.32%

If you have any query related to question then feel free to ask me in a comment.Thanks. Please rate.

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