1. An ICT project has the following characteristics: annual costs are committed at the beginning of each year, and these are the only costs during the year. Cost at the beginning of year Value (KSh.) 250,000 300,000 1 2 3 650,000 4 450,000 5 400,000 Total 2,050,000 It is anticipated that when the project is completed at the end of year 5 it will generate an income of KSh. 3,200,000. What would be the internal rate of return (IRR)? Use the shown discount table.
1. An ICT project has the following characteristics: annual costs are committed at the beginning of each year, and these are the only costs during the year. Cost at the beginning of year Value (KSh.) 250,000 300,000 1 2 3 650,000 4 450,000 5 400,000 Total 2,050,000 It is anticipated that when the project is completed at the end of year 5 it will generate an income of KSh. 3,200,000. What would be the internal rate of return (IRR)? Use the shown discount table.
Chapter9: Capital Budgeting Techniques
Section: Chapter Questions
Problem 12PROB
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Transcribed Image Text:1. An ICT project has the following characteristics: annual costs are committed at the beginning of each
year, and these are the only costs during the year.
Cost at the beginning of year
Value (KSh.)
1
250,000
2
300,000
650,000
4
450,000
5
400,000
Total
2,050,000
It is anticipated that when the project is completed at the end of year 5 it will generate an income of
KSh. 3,200,000. What would be the internal rate of return (IRR)?
Use the shown discount table.
Periods
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
20%
25%
30%
0943
0917
0.842
0.833
1
0.962
0952
0.935
0.926
0.909
0.901
0.893
0.885
0877
0.870
0.769
0.800
0.640
2
0.925
0.907
0.890
0.873
0.857
0.826
0.812
0.797
0.783
0.769
0.675
0.592
0.756
0.694
0.592
0.751
0.683
0.693
0.613
0.543
0.480
3
0.889
0.855
0.864
0.823
0.840
0.792
0.816
0.763
0.794
0.735
0.772
0.708
0.731
0.659
0.712
0.636
0.658
0.572
0.579
0.512
0.410
0.455
0.350
0.482
5
0.784
0.746
0.711
0.497
0.432
0.376
0.327
0.284
0.269
0.207
0.159
0.123
0.094
0.073
0.822
0.747
0.713
0.666
0.681
0.650
0.621
0.593
0.567
0.519
0.402
0.328
0.790
0.760
0.705
0.665
0.630
0.583
0.596
0.547
0.564
0.513
0.507
0.452
0.535
0.482
0.434
0.391
0.456
0.400
0.335
0.279
0.233
0.194
0.262
0.210
0.623
0.425
0.376
0.731
0.703
0.677
0.645
0.627
0.592
0.582
0.544
0.508
0.540
0.500
0.463
0.502
0.460
0.467
0.424
0.404
0.361
0.351
0.308
0.168
0.134
0.333
10
0.676
0.614
0.58
0.422
0.386
0.352
0.322
0.295
0270
0.247
0. 162
0.107
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