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For the cash flows in the previous problem, what is the NPV at a discount rate of

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For the cash flows in the previous problem, what is the NPV at a discount rate of 0 percent? What if the discount rate is 10 percent? If it is 20 percent? If it is 30 percent?


Previous problem

What is the IRR of the following set of cash flows?
Year .......Cash Flow
0 .............−$19,400
1 .................10,400
2 ...................9,320
3 ...................6,900

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
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The NPV of a project is the PV of the outflows plus by the PV of the inflows At a zer...View the full answer


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Essentials of Corporate Finance

Essentials of Corporate Finance

ISBN: 978-1260013955

10th edition

Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan

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The internal rate of return, or IRR, is a metric used to measure the profitability of an investment. It is the discount rate that makes the net present value of an investment equal to zero. To calculate the IRR, we need to know the investment\'s cash flows. These are the inflows and outflows of cash that will result from the investment. For example, an investment in a property might have cash outflows for the purchase price, closing costs, and any renovations, and cash inflows from rent and eventual sale of the property. The IRR is the discount rate at which the NPV of the investment is equal to zero. There are many ways to calculate IRR, from simple spreadsheet functions to more complex financial modeling software. It\'s worth noting that IRR can be a bit tricky when it comes to projects that don\'t have a consistent cash flow over time. These types of investments are known as \"irregular cash flow\" and the IRR might be misleading or not suitable to calculate. There are other metrics to evaluate these investments such as Modified Internal Rate of Return (MIRR) which is a variation of IRR and is used to get more accurate results.

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