Question

You are offered a chance to buy an asset for $5,250 that is expected to produce cash flows of $750 at the end of Year 1, $1,000 at the end of Year 2, $850 at the end of Year 3, and $6,250 at the end of Year 4. What rate of return would you earn if you bought this asset

Answer 1

The rate of return I would earn if you bought the asset is 16.91.

What is the internal rate of return?

Internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested. It is a capital budgeting method.

IRR can be calculated with a financial calculator

• Cash flow in year 0 = $-5250
• Cash flow in year 1 = $750
• Cash flow in year 2 = $1000
• Cash flow in year 3 = $850
• Cash flow in year 4 = $6250

IRR = 16.91%

To learn more about the internal rate of return, please check: brainly.com/question/24172627