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Calculating Cost of Capital and Rate of Return

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The Ogden Corporation makes an investment of $ 25,000, which yields the following cash flow:

Year Cash Flow
1 $ 5,000
2 $ 5,000
3 $ 8,000
4 $ 9,000
5 $10,000

1. What is the present value with a 9% discount rate (cost of capital)?
2. What is the internal rate of return? Use the interpolation procedure
3. In this problem would you make the same decision under both parts a and b? why

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Solution Summary

Excel spreadsheet shows the present value and internal rate of return for an investment.

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