Question

The 1095 Corporation is considering purchasing equipment which will require an initial cash investment of $285,000. The firm expects to increase its cash flow from the equipment as follows: Year 1 - $125,000; Year 2 - $155,000; Year 3 - $115,000. All yearly cash flows are positive #s. If the firm's required return is 13%, what is the approximate IRR for this investment?

Answer 1

The internal rate of return is 18.49%

Step-by-step explanation:

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

A B C

Year Particulars Amount (in $)

0 Initial cost -285000

1 Year 1 cash inflows 125000

2 Year 2 cash inflows 155000

3 Year 3 cash inflows 115000

IRR 18.49% =IRR(C2:C5)

Hence, the internal rate of return is 18.49%