A project requires certain investment X today. It's profitability index is 1.111. The project is evaluated...

 

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A project requires certain investment X today. It's profitability index is 1.111. The project is evaluated based on the firm's 12% cost of capital. Year 1 this project will generate cash inflow of $50,000. This cash flow will increase by $50,000 each year for years 2 through 5. In other words, starting year 1, the cash flow will be $50,000 and this will increase by additional $50,000 for years 2 through 5. What is the project's Internal rate of return, the IRR=? A project requires certain investment X today. It's profitability index is 1.111. The project is evaluated based on the firm's 12% cost of capital. Year 1 this project will generate cash inflow of $50,000. This cash flow will increase by $50,000 each year for years 2 through 5. In other words, starting year 1, the cash flow will be $50,000 and this will increase by additional $50,000 for years 2 through 5. What is the project's Internal rate of return, the IRR=?

Answer rating: 100% (QA)

To calculate the projects Internal Rate of Return IRR we need to find the discount rate at which the ... View the full answer