What is the project\'s internal rate of return? Consider a project with the expe

Question

What is the project's internal rate of return?

Consider a project with the expected cash flows:

    Year                    Cash flow

       0                   -$815,000

       1                    $141,000

       2                    $320,000

       3                    $440,000

What is this project's internal rate of return?

If the discount rate is 1%, what is this project's net present value?

If the discount rate is 4%, what is this project's net present value?

If the discount rate is 10%, what is this project's net present value?

If the discount rate is 18%, what is this project's net present value?

Explanation / Answer

for internal rate of return,

=> -815000+ 141000/(1+r) +320000/(1+r)^2 +440000/(1+r)^3 =0

=> r=4.418%

if r=1% , PV = -815000+ 141000/(1.01) +320000/(1.01)^2 +440000/(1.01)^3 = $65358.36

if r=4% ,Pv = -815000+ 141000/(1.04) +320000/(1.04)^2 +440000/(1.04)^3 =$7593.3

if r=10% PV = -91776.85

if r=185 ,PV = -197891.876

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