Question

Your friend asks you to invest $ 3 comma 000 in a business venture. Based on your​ estimates, you would receive nothing for 3 ​years, at the end of year 4 you would receive ​$1 comma 081​, and at the end of year 5 you would receive $ 3749. If your estimates are​ correct, what would be the IRR on this​ investment?

Answer 1

10.51%

Step-by-step explanation:

The IRR is the discount rate that equates the after tax cash flows from an investment to the amount invested.

A financial calculator can be used to find the IRR.

Cash flow for year 0 = $-3000

Cash flow each year from year one to year 3 = 0

Cash flow for year 4 = $1,081

Cash flow for year 5 = $3,749

IRR = 10.51%

I hope my answer helps you.