Present Value Factor for Reversion of $1
$\begin{array}{cccccc}
\text { Perlod } & 6 \% & 7 \% & 8 \% & 9 \% & 10 \% \
\hline 1 & .943396 & .934579 & .925926 & .917431 & .909091 \
2 & .889996 & .873439 & .857339 & .841680 & .826446 \
3 & .839619 & .816298 & .793832 & .772183 & .751315 \
4 & .792094 & .762895 & .713503 & .708425 & .683013 \
5 & .747258 & .712986 & .680583 & .644931 & .620921 \
6 & .704961 & .666643 & .630170 & .596267 & .564474
\end{array}$
-Using only the information in the table above, what would the IRR be for an investment that cost $500 in period 0 and was sold for $750 in period 5?

Question

Present Value Factor for Reversion of $1
 $\begin{array}{cccccc}
\text { Perlod } & 6 \% & 7 \% & 8 \% & 9 \% & 10 \% \
\hline 1 & .943396 & .934579 & .925926 & .917431 & .909091 \
2 & .889996 & .873439 & .857339 & .841680 & .826446 \
3 & .839619 & .816298 & .793832 & .772183 & .751315 \
4 & .792094 & .762895 & .713503 & .708425 & .683013 \
5 & .747258 & .712986 & .680583 & .644931 & .620921 \
6 & .704961 & .666643 & .630170 & .596267 & .564474
\end{array}$
-Using only the information in the table above, what would the IRR be for an investment that cost $500 in period 0 and was sold for $750 in period 5?

Quizplus · Accepted Answer

The IRR is between 8% and 9% because the PVF for $1 at 8% for 5 periods is 0.630170, which is less than the $750/$500 = 1.50 ratio of the investment's cash flows. The PVF for $1 at 9% for 5 periods is 0.596267, which is greater than the 1.50 ratio.

Present Value Factor for Reversion of $1 -Using Only the Information in the Table Above, What Would