Question

You have been asked to calculate the internal rate of return for an investment with the following cash flows, using the Excel IRR function: The cost of the investment is $500,000. Cash flows in years 1 through 5 are $200,000; $160,000; $120,000; $80,000; and $40,000, respectively. The residual value of the investment is $25,000. Using Excel's IRR function, what is the internal rate of return on the investment after 5 years

Answer 1

Answer:

9.92 %

Explanation:

The Summary of Cash flows to use in the calculation are as follows :

Year 0 = ($500,000)

Year 1 = $200,000

Year 2 = $160,000

Year 3 = $120,000

Year 4 = $80,000

Year 5 = ($40,000 + $25,000) = $65,000

therefore,

the internal rate of return on the investment after 5 years is 9.92 %