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Consider an investment project with the following cash flows: n Cash Flow 0..-$5,000 1..........$0 2...$4,840 3...$1,331 Compute

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Consider an investment project with the following cash flows:

n                   Cash Flow

0………………..-$5,000

1………………..........$0

2………………...$4,840

3………………...$1,331

Compute the IRR for this investment. Is this project acceptable at MARR = 10%?

MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...
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Pranav Prasannan
A dynamic multidisciplined mechanical engineering professional with above 5 years rich experience with companies in Oman and India in the field of Oil & gas industry. Worked as QHSE Engineer in India and Mechanical Engineer in Salalah, Oman and currently working as HSE Engineer in Duqm, Oman. Gifted with strong analytical after and practical field Engineering skills, remarkable on technical details whilst also making effective technical contributions at a higher level. Exposure to the various site activities and knowledge in core field as engineer and in safety. Excellent communication and interpersonal skills and proficiency in the use of PC
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Related Video

The internal rate of return, or IRR, is a metric used to measure the profitability of an investment. It is the discount rate that makes the net present value of an investment equal to zero. To calculate the IRR, we need to know the investment\'s cash flows. These are the inflows and outflows of cash that will result from the investment. For example, an investment in a property might have cash outflows for the purchase price, closing costs, and any renovations, and cash inflows from rent and eventual sale of the property. The IRR is the discount rate at which the NPV of the investment is equal to zero. There are many ways to calculate IRR, from simple spreadsheet functions to more complex financial modeling software. It\'s worth noting that IRR can be a bit tricky when it comes to projects that don\'t have a consistent cash flow over time. These types of investments are known as \"irregular cash flow\" and the IRR might be misleading or not suitable to calculate. There are other metrics to evaluate these investments such as Modified Internal Rate of Return (MIRR) which is a variation of IRR and is used to get more accurate results.

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