Question

A manufacturer of soft drinks wants to increase production at a facility. Their discount rate is 10.35% p.a. The five-year project will require an initial investment of $240,000. The expected end-of-year cash flows are as follows: Year 1 = 42,000; Year 2 = 59,000; Year 3 = 79,000; Year 4 = 90,000; Year 5 = 98,000. The IRR of this project is ____%.

please use finance calculator

Answer 1

Internal rate of return is calculated using a financial calculator by inputting the below:

• Press the CF button.
• CF0= -$240,000. It is entered with a negative sign since it is a cash outflow.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the IRR and CPT button to get the IRR of the project.

The IRR of project is 13.96%.

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