A company has the opportunity to take over a redevelopment project in an industrial area of a city. No immediate investment is required, but it must raze the existing buildings over a four-year period and, at the end of the fourth year, invest $2,400,000 for new construction. It will collect all revenues and pay all costs for a period of 10 years, at which time the entire project, and properties thereon, will revert to the city. The net cash flows are estimated to be as follows:
Year End Net Cash Flow
1 ................................ $500,000
2 ................................ 300,000
3 ................................ 100,000
4 ................................ -2,400,000
5 ................................ 150,000
6 ................................ 200,000
7 ................................ 250,000
8 ................................ 300,000
9 ................................ 350,000
10 .............................. 400,000
Tabulate the PW versus the interest rate and determine whether multiple IRRs exist. If so, use the ERR method when e = 8% per year to determine a rate of return.