IRR

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November 19, 2014 at 9:45 pm #211462
paaras
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Investment of $732000 will generate equal annual inflows of $146400 in perpetuity.
If the first inflow from the investment is a year after the initial investment, what is the IRR of the project?
November 20, 2014 at 4:13 pm #211647
John Moffat
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The discount factor for a perpetuity is 1/r , where r is the rate of interest.
So for a NPV of zero, 146400 / r = 732000
So IRR = r = 0.2, or 20%
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