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hallo sir
A project requires an investment of $24000 at time 0 and generates an inflow of $5000 per yr for 8yrs with the first inflow occuring in one years time
what is IRR
The IRR is the rate that gives a NPV of zero.
The PV of 5,000 a year for 8 years is 5000 x the annuity discount factor for 8 year.
So, 5,000 x annuity discount factor = 24,000
So the 8 year annuity discount factor = 24,000 / 5,000 = 4.800
Now look in the tables along the 8 year row to see what rate of interest gives a factor of 4.800. It is 13% 🙂
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