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Vadim26 [7]
3 years ago
5

Diamond Enterprises is considering a project that will produce cash inflows of $41,650 a year for three years followed by $49,00

0 in Year 4. What is the internal rate of return if the initial cost of the project is $219,000
Business
1 answer:
Anton [14]3 years ago
6 0

Answer:

-8.42%

Explanation:

The internal rate of return on this project can be computed using IRR function in excel spreadsheet as follows:

=IRR(values)

values represent the cash flows arranged from the earliest(year zero cash outflow of -$219000) to the latest( year 4 cash flow which is $49,000) as shown in the attached

IRR=-8.42%

At IRR , the NPV=0

NPV=-$219000+$41650/(1-8.42%)^1+$41650/(1-8.42%)^2+$41650/(1-8.42%)^3+$49000/(1-8.42%)^4=$0

Download xlsx
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