Question

Compute the IRR on the following cash flow streams:

a. An initial investment of $25,655 followed by a single cash flow of $42,390 in year 6. (Round answer to 2 decimal places, e.g. 5.25%.)

IRR %

b. An initial investment of $1,007,364 followed by a single cash flow of $1,607,300 in year 4. (Round answer to 2 decimal places, e.g. 5.25%.)

IRR %

c. An initial investment of $1,683,467 followed by cash flows of $1,451,300 and $957,200 in years 2 and 4, respectively. (Round answer to 2 decimal places, e.g. 5.25%.)

IRR %

Answer 1

Solution :-

(a) According to Question :-

= $42,390 = $25,655 * ( 1 + r )⁶

= ( 1 + r )⁶ = 1.6523

= ( 1 + r ) = 1.0873

r = 0.0873 = 8.73%

IRR = 8.73%

(b) According to Question :-

= $1,607,300 = $1,007,364 * ( 1 + r )⁴

= ( 1 + r )⁴ = 1.5955

( 1+ r ) = 1.1239

r = 0.1239 = 12.39%

IRR = 12.39%

(c)

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