Question

You are evaluating a project that costs $70,000 today. The project has an inflow of $150,000 in one year and an outflow of $60,000 in two years. What are the IRRs for the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

The IRR is used to evaluate the profitability of an investment project. To calculate the IRR, we need to find the discount rate that makes the net present value (NPV) of cash flows equal to zero. In this case, the project costs $70,000 today and generates an inflow of $150,000 in one year and an outflow of $60,000 in two years.

Step-by-step explanation:

The IRR (Internal Rate of Return) is used to evaluate the profitability of an investment project. To calculate the IRR, we need to find the discount rate that makes the net present value (NPV) of cash flows equal to zero.

In this case, the project costs $70,000 today and generates an inflow of $150,000 in one year and an outflow of $60,000 in two years. To calculate the IRR, we set up the equation:

$150,000/(1+IRR) - $70,000/(1+IRR)^2 - $60,000 = 0

By solving this equation, we can find the IRR of the project.