Question

. An investment requires an initial disbursement of € 2,500,000 and the duration of the project is 3 years, in the first of which it generates a cash flow of € 1,500,000, in the second € 3,700,000 and the third € 4,100,000.

- Calculate the Net Present Value of the investment, knowing that inflation is 3% cumulative annually and that the required profitability in the absence of inflation is 8%.
- Calculate the actual internal rate of return of the previous investment.

Answer #1

**Inflation adjusted rate of return = [(1 +return )/(1 +
Inflation)] - 1 = 1.08/1.03 - 1 =4.85%**

a.

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