A project requires an initial investment of $347,500. The project generates free

Question

A project requires an initial investment of $347,500. The project generates free cash flow of $600,000 at the end of year three. What is the Internal rate of return for the project?

Using the given information I enter the initial cash outlay or $347,500 then free cash flows of $100,000 for year 1, $200,000 for year 2 and $300,000 for year 3 (total $600,000 of free cash flows at end of year three).

I am following the instructions in my text and using my financial calculator. I enter as follows:
CF = -347,500 enter down arrow

100,000 enter, down arrow

1  enter, down arrow

200,000 enter, down arrow

1  enter, down arrow

300,000  enter, down arrow

1 enter

IRR CPT and I get 27.282%

This is a practice question so I have the answers and this is NOT one of the answers. I have been able to calculate all of the other IRR questions appropriately. Can you tell me what I am doing wrong?

Explanation / Answer

You seem to be entering everything correctly. Sometimes the calculator will round differently if you have it on a different setting. Make sure it is on the "handing decimal, which means it will work with each problem. It is most likely your decimal setting. Also, sometimes it is easier if you go ahead and and enter your numbers into the calculator as if you were going to find the NPV. My calculator says the correct answer for the IRR is 27.37%. the MIRR is 20.03.

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