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IRR Calculation and Its Application

   

Added on  2019-09-30

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Answer 1IRR is that value of percentage at which the Present value of Cash outflows match with Present value of Cash inflowIn the above question, let us assume initial investment $1359036 and year wise cash inflow as under Year 1111994Year 2112931Year 3113873Year 4 and onwards 114821Growth rate 8%0.9009009010.811622433Assume Discounted rate @11.00%Year Cash inflow PV Factor PV Cash inflow Cash outflow 0010-135903611119940.900910089521129310.811691657315491360.731211327151325268-1359036NPV-33768Assume Discounted rate @9.00%Year Cash inflow PV Factor PV Cash inflow Cash outflow 0010-135903611119940.917410274721129310.841795052315491360.772211962171394016-1359036NPV34980By InterpolationHighest 11-33768Lowest 934980Decrease 2-68748Decrease required for 0 NPV0.98-33768(-33768 x 2) / -68748IRR10.02
IRR Calculation and Its Application_1

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