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IRR

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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?

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Solution Summary

The solution explains the calculation of IRR given the cash flows

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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 ...

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