Final Exam FA17-ACG 2071-99437 Th 2-445 Test: Final Exam 50 of 50 (2 complete) T

Question

Final Exam FA17-ACG 2071-99437 Th 2-445 Test: Final Exam 50 of 50 (2 complete) This Question: 1 pt cbines Company is evalusing an investment of 51 250,000 which will sild net cash inlbws of 5169 837 per year for 10 years with no reaidual valbe which will yisld net cash inflows of 5169 837 per year for 10 years with no reaidual valoe. What is the internal rate of return? Present value of ordinary annuity of 51: 7% 5% 6% 8% 1 0952 0943 0935 0.926 2 1859 1.833 1808 1.783 3 2723 2673 2624 2577 4 3.546 3465 3.387 3312 5 4.329 4212 4.100 3 993 5076 4.767 4 623 4.917 75.785 5582 5.389 5206 6.463 6215.9715.747 7.108-6802-6515 6247 OA. 5% OB.7% OC, 8% OD, 6% Cick to select your answer

Explanation / Answer

Let irr be x%
At irr,present value of inflows=present value of outflows.

1,250,000=169837/1.0x+169837/1.0x^2+169837/1.0x^3+..........+169837/1.0x^10

(1,250,000/169837)=[1/1.0x+1/1.0x^2+.............+1/1.0x^10]

[1/1.0x+1/1.0x^2+.............+1/1.0x^10]=7.360

Hence x=IRR=6%

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