Answer:
13.8%
Explanation:
IRR is the discount rate that equates the after tax cash flows from an investment to the amount invested.
IRR can be calculated using a financial calculator:
Cash flow in year 0 = $-230,000
Cash flow in year 1 = $25,000
Cash flow in year 2 = $25,000 x 1.05 = $26,250
Cash flow in year 3 = $26,250 × 1.05 = $27,562.50
Cash flow in year 4 = $27,562.50 × 1.05 = $28,940.63
Cash flow in year 5 = $28,940.63 × 1.05 = $30,387.66 + $260,000 = $290,387.66
Irr = 13.84%
To find the IRR using a financial calacutor:
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.
I hope my answer helps you
