An investment requires an initial cash outlay of $110,000 and additional outlays of $65,000 at the end of each of the first three years.This investment is expected to result in incomes of $55,000 at the end of the first year,$80,000 at the end of the second year,$95,000 at the end of the third year,and $135,000 at the end of the fourth year.Calculate the IRR using the IRR function.

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Quizplus · Accepted Answer

IRR is the discount rate that makes the NPV of a project equal to zero. In this case, the NPV is calculated as follows:NPV = -110,000 - 65,000 - 65,000 - 65,000 + 55,000/(1+IRR) + 80,000/(1+IRR)^2 + 95,000/(1+IRR)^3 + 135,000/(1+IRR)^4Setting NPV = 0 and solving for IRR using the IRR function in Excel, we get IRR = 12.05%.

An Investment Requires an Initial Cash Outlay of $110,000 and Additional