Question

Roberto bought an apartment building for $1 million. In year 1 he spent $50,000 on repairs and received $100,000 in rent. In year 2 he spent $200,000 on improvement and received $150,000 in rent. In year 3, he spent $25,000 on maintenance and received $150,000 in rent. At the end of year 3 he sold for $1.3 million. What was Roberto's IRR?

Answer 1

- Roberto Purchsed an apartment Building at yaer 0 for $1,000,000 which is cash outflow.

Cash Inflow in year 3 = Rent + Apartment sale value = $150,000 + $1300,000 = $1450,000

Calculating the IRR of Roberto's using Excel "IRR" function:-

So, IRR of Roberto is 12.72%

Note- All Income recieved is Cash inflow while expense are cash outflow.

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