Answer:
A
IRR = 8.27%
B
IRR = 4.69%
C
IRR = 10.77%
D
IRR = 9.47%
E
IRR = 4.81%
Explanation:
Here is the table containing information on the investments
Initial investment value Future Investment Value Year
$1,100 $2,637 11 $9,500 $13,091 7 $400 $1,855 15 $3,200 $5,030 5 $6,000 $9,598 10
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
A
Cash flow in year 0 = $-1,100
Cash flow from year 0 - 10 = 0
Cash flow in year 11 = $2,637
IRR = 8.27%
B
Cash flow in year 0 = $-9,500
Cash flow from year 0 - 6 = 0
Cash flow in year 7 = $13,091
IRR = 4.69%
C
Cash flow in year 0 = $-400
Cash flow from year 0 - 14 = 0
Cash flow in year 15 = $1,855
IRR = 10.77%
D
Cash flow in year 0 = $-3200
Cash flow from year 0 - 4 = 0
Cash flow in year 5 = $5,030
IRR = 9.47%
E
Cash flow in year 0 = $-6000
Cash flow from year 0 - 9 = 0
Cash flow in year 10 = 9598
IRR = 4.81%
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.
