Question

2. The following cash-flow pattern has two IRRs. Graph the NPV of these cash flows as...

2. The following cash-flow pattern has two IRRs. Graph the NPV of these cash flows as a function of the discount rate. Use a data table to record your results for interest rates between 0% and 72% (see worksheet for template). Then use the IRR function to calculate these two IRRs.

Year

Cash flow

0

-500

1

600

2

300

3

300

4

200

5

-1,000

6

600

7

700

8

-1500
Discount rate 20%
NPV Data table
0.00
Year Cash flow 0%
0 -500 4%
1 600 8%
2 300 12%
3 300 16%
4 200 20%
5 -1,000 24%
6 600 28%
7 700 32%
8 -1500 36%
40%
44%
48%
IRR1 52%
IRR2 56%
60%
64%
68%
72%
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