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    Internal rate of return

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    The expected cash flows are as follows

    year Cash Flow
    0 - $315,000.00
    1 + $71,000.00
    2 + $150,000.00
    3 + $150,000.00

    What is the project's internal rate of return and the NPV on the following discount rates?

    If I hand plotted a chart where the discount rate is on the x axis and the net present value on the y axis and plotted the NPV of the project as a function of the discount rate by dots for the 4 discount rates the curve will intersect the horizontal line at a particular discount rate. What is the discount rate at which the graph intersects the horizontal axis?

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    Solution Preview

    Project's IRR can be calculated through Excel. Remember the manual way to get IRR is very tedious and is a trial and error process. However, Excel is very good at calculating IRR quickly.

    To get ...

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