P10-17 (similar to) Question Help Long-term investment decision, IRR method Pers

Question

P10-17 (similar to) Question Help Long-term investment decision, IRR method Personal Finance Problem Bly and Mandy Jones have $24,000 to invest. On average, they do not make any investment that will not return at least 74% per year. Th rate of return (IRR) method and their requirements, determine whether Bily and Mandy should undertake the invesment ey have been approached with an investrert opponnty that requiress24,000 uphort and has a payout of S io at me ond of ear ann tSysas Us ar heme The internal rate of rehm (RR) of this mestment opportunity is%. (Roud to or e d cinal place)

Explanation / Answer

Cash outflow at the beginning = PV = -24000

Payment = 6100

Years = 5

I = 7.4%

NPV= {After-Tax Cash Flow / (1+r)^t} – Initial Investment

There are two ways to calculate IRR in Excel:

IRR = 8.5%

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