Question

1.Your friend asks you to invest $ 2000 in a business venture. Based on your​ estimates, you would receive nothing for 3 ​years, at the end of year 4 you would receive ​$721​, and at the end of year 5 you would receive $ 2991. If your estimates are​ correct, what would be the IRR on this​ investment? The yield on this investment is nothing​%. ​(Round to the nearest whole​ percent.)

2. You invest $3,328 in stock and receive $ 44,$49​,$49​, and $44 in dividends over the following 4 years. At the end of the 4 ​years, you sell the stock for $5,400.

What was the IRR on this​ investment?

3.

Assume you invest $4,500

today in an investment that promises to return $8,770

in exactly 10 years.

a. Use the​ present-value technique to estimate the IRR on this investment.

b. If a minimum annual return of 15%

is​ required, would you recommend this​ investment?

a. The IRR of the investment is

nothing​%.

​(Round to the nearest whole​ percent.)

Answer 1

1

Investment
IRR is the rate at which NPV =0
IRR	0.137646398
Year	0	1	2	3	4	5
Cash flow stream	-2000	0	0	0	721	2991
Discounting factor	1	1.137646	1.294239	1.472387	1.6750554	1.905621
Discounted cash flows project	-2000	0	0	0	430.43352	1569.567
NPV = Sum of discounted cash flows
NPV Investment =	0.000783256
Where
Discounting factor =	(1 + IRR)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor
IRR=	13.76%

2

Stock
IRR is the rate at which NPV =0
IRR	0.140405582
Year	0	1	2	3	4
Cash flow stream	-3328	44	49	49	5444
Discounting factor	1	1.140406	1.300525	1.483126	1.691365
Discounted cash flows project	-3328	38.58276	37.6771	33.03833	3218.7021
NPV = Sum of discounted cash flows
NPV Stock =	0.000257525
Where
Discounting factor =	(1 + IRR)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor
IRR=	14.04%

Please ask remaining parts seperately, questions are unrelated, I have done one bonus