Compute the IRR on the following cash flow streams: (a.) An initial investment o

Question

Compute the IRR on the following cash flow streams:

(a.) An initial investment of $27,775 followed by a single cash flow of $45,590 in year 6. (Round intermediate calculations to 0 decimal places, e.g. 1,251 and final answer to 2 decimal places, e.g. 15.25%.) IRR _______ %

(b.) An initial investment of $833,320 followed by a single cash flow of $1,240,600 in year 4. (Round intermediate calculations to 0 decimal places, e.g. 1,251 and final answer to 2 decimal places, e.g. 15.25%.) IRR ______ %

(c.) An initial investment of $2,169,285 followed by cash flows of $1,834,400 and $1,144,900 in years 2 and 4, respectively. (Round intermediate calculations to 0 decimal places, e.g. 1,251 and final answer to 2 decimal places, e.g. 15.25%.) IRR _______ %

Explanation / Answer

Let, IRR be denominated by 'r'

(a) 45,590 = 27,775*(1+r)6

=> (1+r)6 = 1.641404

=> r = 8.61%

(b) 1240600 = 833320*(1+r)4

=> (1+r)4 = 1.641404

=> r = 10.46%

c) IRR = 12.40%

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