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Internal Rate of Return and Net Present Value

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1. An investment requires an initial cash outlay of $100,000 and additional outlays of $50,000 at the end of each of the first three years. This investment is expected to result in incomes of $40,000 at the end of the first year, $70,000 at the end of the second year, $90,000 at the end of the third year, and $120,000 at the end of the fourth year.

a. Calculate the internal rate of return for these cash flows.
b. Calculate the net present value using a discount rate of 15% per year.

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IRR and NPV are calculated.

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