Question: You are evaluating purchasing the rights to a project that will generate after tax expected cash flows of $90k at the end of each of
You are evaluating purchasing the rights to a project that will generate after tax expected cash flows of $90k at the end of each of the next five years, plus an additional $1,000k at the end of the fifth year as the final cash flow. You can purchase this project for $950k. Note: All dollar values are given in units of $1k = $1000. At this price, what rate of return would you earn on the investment (aka what is the internal rate of return)?
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