Question

Present Value of an Annuity of 1 Periods 8% 9% 10% 1 .926 .917 .909 2 1.783 1.759 1.736 3 2.577 2.531 2.487 A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $97116 and is expected to generate cash inflows of $39000 each year for three years. The approximate internal rate of return on this project is

Answer 1

Answer:

9.92%

Explanation:

Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested

IRR can be calculated using a financial calculator:

Cash flow in year 0 = $-97116

Cash flow each year from year 1 to 3 = $39000

IRR = 9.92%

To find the IRR using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.

I hope my answer helps you