A golf developer wishes to build a new golf course. It will cost $1.5 million now (time 0) for buying the land and the initial design and development. An additional $600,000 will be spent at the end of the 1st year for more course development work. The course will open halfway through year 2 and is expected to generate $200,000 in revenues (cash inflows will $200,000 at time 2). During this year, $500,000 will be spent on a new clubhouse (cash outflow of $500,000 at time 2). Net revenues are projected to be $300,000 for year 3, $400,000 for year 4, $500,000 for year 5 and $600,000 for years 6 to 15 (assume all values are at the end of the year). The developer will then sell the course at the end of the 15th year $2.75 million (time 15). (a) Calculate the net present value of this investment at the following cost of capital rates: 0%, 2%

(b) Calculate the internal rate of return (IRR) for this investment to 2 decimal points.

(c) It turns out that golf was a fleeting fad and actual revenues in years 7 to 10 were $500,000, $400,000, $300,000 and $200,000. What rate of return (IRR), to two decimal points, does the developer actually earn after 10 years?

(d) To combat the declining revenues of (c), the developer spends an additional $600,000 at the end of year 10 (time 10) to build a double curling rink in order to offer sporting activities year round. Revenues for the next 5 years are estimated to be $700,000 (time 11 to 15). At the end of the last year, the developer sells the course and curling rinks for $3.25 million. What was the final IRR, to two decimal points?