could you please answer this question and put the steps :) Thankk you !!! Intern

Question

could you please answer this question and put the steps :) Thankk you !!!

Internal Rate of Return A project is estimated to cost $231,268 and provide annual net cash flows of $34,000 for nine years. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 1.833 1.736 1.690 1.626 1.528 2.673 2.487 2.402 2.283 2.106 3.465 3.170 3.037 2.855 2.589 4.212 3.791 3.605 3.353 2.991 4.917 4.355 4.111 3.785 3.326 5.582 4.868 4.564 4.160 3.605 6.210 5.335 4.968 4.487 3.837 6.802 5.759 5.328 4.772 4.031 7.360 6.145 5.650 5.0194.192 Determine the internal rate of return for this project, using the Present Value of an Annuity of $1 at Compound Interest table shown above. VOA W N

Explanation / Answer

Lets use trial and error method to compute internal rate of return: IRR is the discount factor where NPV is 0. Step:1 Compute NPV @ 20% Year Cashflow PV @15% Present value 0 -231268 1 -231268 1 to 9 34000 4.031 137054 NPV -94214 Step:2 Compute NPV @ 15% Year Cashflow PV @15% Present value 0 -231268 1 -231268 1 to 9 34000 4.772 162248 NPV -69020 Step:3 Compute NPV @ 12% Year Cashflow PV @15% Present value 0 -231268 1 -231268 1 to 9 34000 5.328 181152 NPV -50116 Step:4 Compute NPV @ 10% Year Cashflow PV @15% Present value 0 -231268 1 -231268 1 to 9 34000 5.759 195806 NPV -35462 Step:5 Compute NPV @ 6% Year Cashflow PV @15% Present value 0 -231268 1 -231268 1 to 9 34000 6.802 231268 NPV 0 NPV becomes zero when discount factor=6%.Hence Internal rate of return=6%

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