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lisov135 [29]
2 years ago
11

If a project's IRR is 13% and the project provides annual cash flows of $15,000 for 4 years, how much did the project cost?

Business
1 answer:
Leokris [45]2 years ago
3 0

Answer: a. $44,617

Explanation:

The Internal Rate of Return brings the NPV of a project to zero which means that the cost of the project will be the Net present value of the cash inflows using the IRR as the discount rate.

This is a constant payment so can be treated as an annuity.

Present value of annuity = Annuity * Present value interest factor of annuity, 4 years , 13%

= 15,000 * 2.9745

= 44,617.5

= $44,617 approx

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