Question

ABC Co wishes to undertake a project requiring an investment of $732,000 which will generate equal annual inflows of $146,400 in perpetuity. If the first inflow from the investment is a year after the initial investment, what is the IRR of the project? *

Answer 1

Answer:

The IRR of the project is 13%.

Explanation:

ABC Co wishes to undertake a project requiring an investment of $732,000 which will generate equal annual inflows of $146,400 in perpetuity. If the first inflow from the investment is a year after the initial investment, what is the IRR of the project?

   

The first inflow from the investment is a year after the initial investment. Solving for "n", we get:

$2,548,831 = 732000/(1 + n)^1

$732,000/((1*(1+n))^1) = $2,548,831

$n = ln(($2,548,831)/$732000)

Using the function of n that we found above:

$n = ln((($2,548,831/$732000))/1)  

Plugging in for "n" to get the IRR:

IRR = 13%