Question

Year Cash Flow 0 -10000 1 3000 2 3000 3 3000 4 3000 Given the cash...

Year

Cash Flow

0

-10000

1

3000

2

3000

3

3000

4

3000

Given the cash flows in the table​ above, the point at which the NPV profile crosses the vertical axis​ is:

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Answer #1

The point at which the NPV profile crosses the vertical axis is the investmenrs " Internal rate of return". The IRR is the discount rate that makes the present value of cash inflows equal to initial investment.

The IRR is found using the following equation

The value of r is found using trial and error method.

Ler r = 7%

At 7% , the present value of cash inflows = $10,161.63 ( Higher than $ 10000 )

At 8%, the present value of cash inflows = $9,936.38 ( less than $ 10000 )

IRR is between 7% and 8%

IRR = 7.72 %

The point at which the NPV profile crosses the vertical axis​ is   7.72 %  

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