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Suppose you have a project with a cash flow of -150,000 today, +900,000 in one year and -1,000,000 in two years.

What would be the IRR of this project?

Solution Preview

IRR is the discount rate that will make the present value of the inflows equal to the initial investment. If r is the IRR we get
-150,000 = 900,000/(1+r) + 1,500,000/(1+r)^2

The cash flows given by you are very large. The initial investment is only 150,000 and it returns 900,000 in year 1 and ...

Solution Summary

The solution explains the calculation of IRR given the cash flows