Question

What is the IRR? Show your work...

Free Cash Flows	$          (270,000)	$                     55,800	$            55,800	$                55,800	$           85,800
FCF= Unlevered net income + Depresiation - investment in PP&E- CHANGE IN nwc + Salvage value
Cumulative Cash Flow	-$270,000.00	-$214,200.00	-$158,400.00	-$102,600.00	-$16,800.00
how cumulative cash flow was calculated		270000-55800	214,200-55800	158,400-55,800	102,600-85,800
PV factor (1/(1+9.93%)^year	1	0.90966979	0.827499127	0.752750957	0.684754805
Discounted cash flow	-$270,000.00	$                     50,760	$       46,174.45	$          42,003.50	$     58,751.96
NPV	-$72,310.51

Answer 1

Using Excel
Approach 1
=IRR({-270000;55800;55800;55800;85800})
=-2.3567494%

or
Approach 2
=RATE(4,55800,-270000,30000)
=-2.3567494%

Using financial calculator
Approach 1
press CF 2nd CE/C
press CF
-270000
Enter
down arrow,
55800
Enter
down arrow (twice),
55800
Enter
down arrow (twice),
55800
Enter
down arrow (twice),
85800
Enter
down arrow (twice),

press IRR
Enter
press down arrow
press CPT
=-2.3567494%

Approach 2
N=4
PMT=55800
FV=30000
PV=-270000
CPT I/Y=-2.3567494%