Kumi Ltd is considering an investment in a project, which requires an immediate payment of GHS15,000, followed by a further investment of GHS5,400 at the end of the first year. The subsequent return phase net cash inflows are expected to arise at the end of the following years: Year 1 2 3 4 5 Cash inflow (GHS) 6,500 7,750 5,750 4,750 3,750 You are required to estimate the internal rate of return of this project assuming the company’s cost of capital is 16%.

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
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Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...
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Kumi Ltd is considering an investment in a project, which requires an immediate payment of GHS15,000, followed by a further investment of GHS5,400 at the end of the first year. The subsequent return phase net cash inflows are expected to arise at the end of the following years:


Year                          1            2           3               4                  5

Cash inflow (GHS)  6,500     7,750     5,750        4,750          3,750

You are required to estimate the internal rate of return of this project assuming the company’s cost of capital is 16%. 

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