A property was acquired for $950,000 and then produced cash flows of $100,000,$120,000,$135,000,$135,000,and $125,000 at the end of years one through five,respectively.The property was then sold for $1,200,000 at the end of the fifth year.What was the internal rate of return for this investment?

Question

Quizplus · Accepted Answer

Using a financial calculator, the internal rate of return of this investment is found to be 16.5%. The cash flows are as follows: CF0 = -950,000; CF1 = 100,000; CF2 = 120,000; CF3 = 135,000; CF4 = 135,000; CF5 = 1,325,000 (cash flow from sale of property = selling price - balance owed on property).

A Property Was Acquired for $950,000 and Then Produced Cash