Question

Consider the following cash flows: Year Cash Flow 0 –$ 33,000 1 13,400 2 18,300 3 10,800 What is the IRR of the cash flows? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

14.23%

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 with a financial calculator

Cash flow in year 0 = –$ 33,000

Cash flow in year 1 = 13,400

Cash flow in year 2 = 18,300

Cash flow in year 3 = 10,800

IRR = 14.23%

To find the IRR using a financial calculator:

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.