Question

Iron Works International is considering a project that will produce annual cash flows of $38,700, $47,400, $58,100, and $23,600 over the next four years, respectively. What is the internal rate of return if the project has an initial cost of $112,300?

Answer 1

Answer:

internal rate of return (IRR) for Iron Works International is 19%

Explanation:

Internal rate of return (IRR) is the minimum discount rate that management uses to spot what capital investments or future projects will yield a suitable return and be worth pursuing.

The IRR for a selected project is that the rate that equates net present value of future cash flows from the project to zero.

In other words, if we compute this value of future cash flows from a possible project using the internal rate with the discount rate and subtract out the initial investment, our net present value of the project would be zero.

For Iron Works International, the internal rate of return of the project with an initial cost of $112,300 is explained mathematically in the attached sheets.

Answer 2

Answer:

The IRR of the project is 18.97%.

Explanation:

Internal rate of return (IRR) can be described as the interest or the rate rates of return that equates the net present value (NPV) both the positive and negative cash flows of a product or an investment equal zero.

This can simply be estimated using the IRR function of the Microsoft Excel.

For this question, the IRR of the project is 18.97% when the IRR function of the Microsoft Excel is used.

Find attached the excel sheet for the calculation.

Download xlsx