Question 4

This is a Growing perpetuity formula. Remember the rate of discount and rate of return are one and the same thing.

A firm has invested $150,000 in a project. The project will return cash of $2,000 at the end of the first year, and every year in the future with a growth rate of 5%. That is, it will return $2,100 at the end of the second year, $2,205 at the end of the third year and so on.

What is the IRR for the project?