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HELP ME PLS URGENT

ashay (CA Final Student) (782 Points)

06 March 2011

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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5 Replies

Naveen Ravella (Program Management) (33 Points)
Replied 14 November 2011

It is 18% as per my calculation dude.

(Guest)

17.805% per my calculation

ashish gupta ( student) (1922 Points)
Replied 14 November 2011

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.

Hemanth Sai (CA-FINAL,AUDIT TRAINEE) (110 Points)
Replied 14 November 2011

Its 17.8047460595271% ...

its pakka...lock kardo.

CA Miss Naamah (N H R & Associates) (377 Points)
Replied 18 November 2011

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.