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Problem 13-9 IRR (LG13-4) Compute the IRR static for Project E. The appropriate cost of capital...

Problem 13-9 IRR (LG13-4) Compute the IRR static for Project E. The appropriate cost of capital is 8 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project E Time: 0 1 2 3 4 5 Cash flow –$1,600 $590 $660 $640 $420 $220

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Answer #1

IRR is the rate for which NPV = 0 for a project.

NPV = Present value of future cash flow - Initial Investment

0 = 590/(1+IRR)^1 + 660/(1+IRR)^2 + 640/(1+IRR)^3 + 420/(1+IRR)^4 + 220/(1+IRR)^5 - 1600

We will use heat and trial method to get that value for which above equation get satisfy.

IRR = 20.36% Answer

We can also use financial calculator to solve for IRR:

Cf0 = -1600

C01 = 590

C02 = 660

C03 = 640

C04 = 420

C05 = 220

IRR -> CPT

IRR = 20.36% Answer

Please let me know in case you have any queries and I will be happy to assist you.

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