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Josef Samir is an investor in the Egyptian Exchange (EGX). He invests E£5,000 (Egyptian pound) in...

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Finance

Josef Samir is an investor in the Egyptian Exchange (EGX). Heinvests E£5,000 (Egyptian pound) in a cement company and receivesdividends of E£65, 75, 76, and 76 over the next four years. At theend of the four years, he sells the stock for E£8,000. What is theIRR on this investment?

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4.1 Ratings (551 Votes)

IRR is that discount rate for which NPV = 0. It has to be found out by trial and error.
Year Cash Flow PVIF at 13% PV at 13% PVIF at 14% PV at 14%
0 $ -5,000.00 1.00000 $       -5,000.00 1.00000 $ -5,000.00
1 $          65.00 0.88496 $               57.52 0.87719 $          57.02
2 $          75.00 0.78315 $               58.74 0.76947 $          57.71
3 $          76.00 0.69305 $               52.67 0.67497 $          51.30
4 $    8,076.00 0.61332 $         4,953.16 0.59208 $    4,781.64
$            122.09 $        -52.33
IRR lies between 13% and 14%. By simple interpolation IRR = 13%+1%*122.09/(122.09+52.33) = 13.70%

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Transcribed Image Text

Josef Samir is an investor in the Egyptian Exchange (EGX). Heinvests E£5,000 (Egyptian pound) in a cement company and receivesdividends of E£65, 75, 76, and 76 over the next four years. At theend of the four years, he sells the stock for E£8,000. What is theIRR on this investment?

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