AN INVESTMENT OF Rs. 10000 IS ENVISAGED FOR A PROJECT WHICH PROMISES CASH FLOWS OF Rs. 5000 IN 1ST YEAR, Rs. 4000 IN 2ND YEAR , Rs. 3000 IN 3RD YEAR AND Rs. 2000 IN 4TH YEAR. WHAT IS THE INTERNAL RATE OF RETURN ON THIS INVESTMENT PROJECT ?
BY USING RATE OF 10% AND 20% I GOT A ANSWER OF 18.04% BUT BY USING ANOTHER RATE I GET ANOTHER ANSWER
I AM A BIT CONFUSED WITH THIS CONCEPT PLS HELP
AND CAN ANY ONE PLS HELP ME WITH CAPITAL RATIONING I AM A BIT CONFUSED CAN ANY ONE GIVE ME THE STEPS PLS HELP ITS URGENT
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HELP ME PLS URGENT
Replies (5)
It is 18% as per my calculation dude.
IRR figure depends on how broad range of the two rates you choose to find out the rate. of you take a broader range then it will fluctuate. so if you want the concise rate then take a number of trials with not so gap between the two rates.
Its 17.8047460595271% ...
its pakka...lock kardo.
Internal rate of return is the rate at which cash outlay is equal to present value of cash inflow. in short Net present value is zero. It means at what rate of cost of capital, the cash outflow can be recovered.
Steps:
Take Present value factor as X.
Then find NPV
Then u will get X value.
In the PVIF table locate the value of X. This value will lie between 2 rates. Then by using interpolation, u will get the exact rate.
I have not calculated the rate. But these are the step.
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