A financial asset costs $500 and produces cash flows in years 1, 2, . . ., 5.

The year 1 cash flow is $100 and subsequent cash flows grow at a rate of 5%. As you can see below, the asset’s internal rate of return (IRR) is 3.32%.

Use Solver to find a growth rate such that the IRR is 10%.

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123456789 9 10 11 A Year 1 cash flow Cash flow growth rate Year 0 1 2 234 5 12 Internal rate of return B C 100.00 5.00% Cash flow -500.00 100.00