QUESTION 1 QUESTION 2 Fillip bought a business for R671 000 on July 31, 2017. Th

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QUESTION 1

QUESTION 2

Fillip bought a business for R671 000 on July 31, 2017. The net income he generated from that business from the end of August 2017 to now, the end of May 2018, are in the table below. He plans to sell the business at the end of May 2018 for R830 000. Determine the internal rate of return on this investment. Date August 31, 2017R59,806.00 September 30, 2017R59,860.00 October 31, 2017R56,599.00 November 30, 2017R49,905.00 December 31, 2017R40,594.00 January 31, 2018R55,089.00 February 28, 2018R44,899.00 March 31, 2018 April 30, 2018 May 31, 2018 Income R58,984.00 R42,205.00 R49,988.00

Explanation / Answer

In Excel by using the IRR formulae, =IRR(all series of cash flows) you will get the above value.

Internal Rate of Return is 9%.

Cash Flow Initial Investment 0 -671000 1 59806 2 59860 3 56599 4 49905 5 40594 6 55089 7 44899 8 58984 9 42205 10 49988 Sale Value 830,000 IRR 9%

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