In this exercise we solve iteratively for the internal rate of return. Consider an investment that costs 800 and has cash flows of 300, 200, 150, 122, and 133 in years 1 to 5.

Setting up the loan amortization table below shows that 10% is greater than the IRR (since the return of principal at the end of year 5 is less than the principal at the beginning of the year).Setting cell B1 to 3% shows that 3% is less than the IRR, since the return of principal at the end of year 5 is greater than the principal at the beginning of year 5.

By changing the IRR in cell B1, find the internal rate of return of the investment.

1 IRR? A B C 10.00% E H 2 LOAN TABLE Division of payment between: Principal Payment Year Cash flow Year at beginning at end of Interest Principal of year year 3 4 0 -800 1 800.00 300.00 80.00 220.00 5 1 300 2 580.00 200.00 58.00 142.00 6 2 200 3 438.00 150.00 43.80 106.20 7 3 150 4 331.80 122.00 33.18 88.82 8 4 122 5 242.98 133.00 24.30 108.70 9 5 133 6 134.28