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Vadim26 [7]
3 years ago
6

Suppose an industrial building can be purchased for $2,500,000 today and is expected to yield cash flows of $180,000 each of the

next five years. (Note: assume cash flows are received at end of year.) If the building is expected to be sold at the end of the fifth year for $2,800,000, calculate the IRR for this investment over the five year holding period
Business
1 answer:
krek1111 [17]3 years ago
7 0

Answer: 9.20%

Explanation:

Use Excel to find out the IRR.

Ensure that you write the purchase price in negatives as shown in the attached picture.

The cashflow for the last year will be the sum of the selling price and the cash flow.

= 2,800,000 + 180,000

= $2,980,000

IRR = 9.20%

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