In this exercise we solve iteratively for the internal rate of return. Consider an investment which costs
Question:
In this exercise we solve iteratively for the internal rate of return. Consider an investment which costs 800 and has cash flows of 300, 200, 150, 122, 133 in years 1?5. Setting up the loan table below shows that 10% is greater than the IRR (since the return of principal at the end of year 5 is less than the principal at the beginning of the year):
Setting the IRR? cell equal to 3% shows that 3% is less than the IRR, since the return of principal at the end of year 5 is greater than the principal at the beginning of year 5. By changing the IRR? cell, find the internal rate of return of the investment.
Internal Rate of ReturnInternal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Question Posted: