A $5000 investment today will return $1,313 each year for the
next four years with the...
Free
50.1K
Verified Solution
Link Copied!
Question
Finance
A $5000 investment today will return $1,313 each year for thenext four years with the first payment starting in one year. TheNPV of this investment is negative at your required return of 2.5%.Which of the following is closest to the internal rate of return onthis project?
2%
4%
1%
3%
Answer & Explanation
Solved by verified expert
4.3 Ratings (557 Votes)
Ans 2%
Year
Project Cash Flows (i)
DF@ 2%
DF@ 2% (ii)
PV
of Project ( (i) * (ii) )
0
-5000
1
1
                   Â
(5,000.00)
1
1313
1/((1+2%)^1)
0.980
                    Â
1,287.25
2
1313
1/((1+2%)^2)
0.961
                    Â
1,262.01
3
1313
1/((1+2%)^3)
0.942
                    Â
1,237.27
4
1313
1/((1+2%)^4)
0.924
                    Â
1,213.01
NPV
                                Â
0
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
