Question
Calculate the annual internal rates of return (IRR) for the following investments (time t is in years): At t = 0, the cost is $100.
Calculate the annual internal rates of return (IRR) for the following investments (time t is in years):
- At t = 0, the cost is $100. The cash flows are $100 at t = 1 and $250 at t = 3.
- At t = 0, the cost is $150. The cash flows are $100 at t = 1 and $250 at t = 3.
- At t = 0, the cost is $100. The cash flows are $100 at t = 1 and $250 at t = 2.
- At t = 0, the cost is $100. The cash flows are $250 at t = 1 and $100 at t = 3.
Cash flows are $0 when not specified. Calculate the IRR of each of the problems above and answer which of these investments has the highest IRR? Why?
What is the formula to calculate this problem?
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Financial Management Core Concepts
Authors: Raymond Brooks
4th Edition
134730417, 134730410, 978-0134730417
