Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 - $218,917 - $16,419 1 25,700 5,985 2 53,000 8,370 3 58,000 13,931 4 420,000 8,655 Whichever project you choose, if any, you require a 6 percent return on your investment. What is the IRR (in %) for Project A?

Question

Business

Jan Patel

24 July, 08:49

Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 - $218,917 - $16,419 1 25,700 5,985 2 53,000 8,370 3 58,000 13,931 4 420,000 8,655 Whichever project you choose, if any, you require a 6 percent return on your investment. What is the IRR (in %) for Project A?

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Answers (1)

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Andy Rubio · Answer 1

The IRR (in %) for Project A is 31%.

Explanation:

Let IRR be x%

At IRR, present value of inflows = present value of outflows.

218917 = 25700/1.0x + 53000/1.0x^2 + 58000/1.0x^3 + 420,000/1.0x^4

solving for x, we find:

x = 31%

Therefore, The IRR (in %) for Project A is 31%.