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calculate the internal rate of return

calculate the internal rate of return

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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calculate the internal rate of return 

Pepper Co is contemplating three available investment opportunities, the cash flows of which are given below. Project Initial investment Cash flow Y1 Y2 Y3 Y4 Y5 $000 $000 $000 $000 S000 $000 (125) 50 50 50 50 (120) 15 15 15 15 200 (170) 120 In each case the initial investment represents the purchase of plant and equipment whose realisable value will be 20% of initial cost, receivable in addition to the above flow at the end of the life of the project. 80 Required: For each of the three projects: (a) Calculate the accounting rate of return (based on the average investment method) (b) Calculate the payback period (c) Calculate the net present value using a discount rate of 10% (d) Calculate the internal rate of return
Transcribed Image Text:Pepper Co is contemplating three available investment opportunities, the cash flows of which are given below. Project Initial investment Cash flow Y1 Y2 Y3 Y4 Y5 $000 $000 $000 $000 S000 $000 (125) 50 50 50 50 (120) 15 15 15 15 200 (170) 120 In each case the initial investment represents the purchase of plant and equipment whose realisable value will be 20% of initial cost, receivable in addition to the above flow at the end of the life of the project. 80 Required: For each of the three projects: (a) Calculate the accounting rate of return (based on the average investment method) (b) Calculate the payback period (c) Calculate the net present value using a discount rate of 10% (d) Calculate the internal rate of return
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