Question

You are offered a chance to buy (cash outflow) an asset for $200,000 that is expected to produce cash inflows of $100,000 at the end of Year 1, $77,000 at the end of Year 2, $52,000 at the end of Year 3, and $40,000 at the end of Year 4. What rate of return (IRR) would you earn if you bought this asset?

Answer 1

15.65%

Step-by-step explanation:

The computation of the internal rate of return is shown below:

Given that

Years Cash outflow/ cash inflow

0 -$200,000

1 $100,000

2 $77,000

3 $52,000

4 $40,000

The formula is

= IRR()

AFter applying the above formula, the internal rate of return is 15.65%