Answer all parts of question if there is multiple parts not just what\'s below t

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Answer all parts of question if there is multiple parts not just what's below the line please ;)

A company has the opportunity to take over a redevelopment project in an industrial area of a city. No immediate investment is required, but it must raze the existing buildings over a four-year period and, at the end of the fourth year, invest $2,390,000 for new construction. It will collect all revenues and pay all costs for a period of 10 years, at which time the entire project, and properties thereon, will revert to the city. The net cash flows are estimated to be as shown on the right. Tabulate the PW versus the interest rate and determine whether multiple IRRs exist. If so, use the ERR method when 896 per year to determine a rate of return. Year End 1 2 3 4 Net Cash Flow $510,000 270,000 90,000 - 2,390,000 150,000 210,000 270,000 330,000 390,000 450,000 6 Click the icon to view the interest and annuity table for discrete compounding when the 8 9 10 MARR is 8% per year.

Explanation / Answer

From above data it is clear that it has 2 IRRs of 7.552% and 31.175%

For EARR
(PV of expenses discounnted at 8%) * (1+r)10 = (FV of revenues at 8%)

(PV of expenses discounnted at 8%) * (1+r)10 = (FV of revenues at 8%)
r = (FV/PV)(1/10) -1 = 7.952%

Best of Luck. God Bless

A B C D E F Year Net Cash flow Interest rate Present Worth Formula = NPV(C1,B1:10) IRR = IRR( B1:B10,F1:F8) Guess values 1 1 510,000 1% $221,344.87 7.552% 5% 2 2 270,000 2% $170,861.98 7.552% 10% 3 3 90,000 3% $127,572.79 7.552% 15% 4 4 -2,390,000 4% $90,615.85 31.175% 20% 5 5 150,000 5% $59,232.26 31.175% 25% 6 6 210,000 6% $32,752.99 31.175% 30% 7 7 270,000 7% $10,587.79 31.175% 35% 8 8 330,000 8% ($7,784.34) 31.175% 40% 9 9 390,000 9% ($22,823.57) 31.175% 45% 10 10 450,000 10% ($34,936.56)

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