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

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2 years ago

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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

Business

1 answer:

jeyben [28] · Answer 1 · 2022-11-26T13:24:37+03:00

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

<h3>What is the internal rate of return?</h3>

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