Using Excel and all formulas.Long-term investment decision, IRR method Personal

Question

Using Excel and all formulas.Long-term investment decision, IRR methodPersonal Finance ProblemBilly and Mandy Jones have

$23 comma 00023,000

to invest. On average, they do not make any investment that will not return at least

7.47.4%

per year. They have been approached with an investment opportunity that requires

$23 comma 00023,000

upfront and has a payout of

$5 comma 9005,900

at the end of each of the next 5 years. Using the internal rate of return (IRR) method and their requirements, determine whether Billy and Mandy should undertake the investment.

The internal rate of return (IRR) of this investment opportunity is

nothing%.

(Round to one decimal place.)

Explanation / Answer

Using Excel, we need to key in the follwing values in a single column say column "B".

As the IRR is above the required return of 7.47% and at 8.9%, the investment opportunity should be undetaken.

Column A Column "B"    Time is 0 = -23,000/-. ( Initial investment entered as an negative amount). -23000 Time is 1= + 5,900/- ( Return at the end of the first year) 5900 Time is 2= + 5,900/- ( Return at the end of the second year) 5900 Time is 3= + 5,900/- ( Return at the end of the third year) 5900 Time is 4= + 5,900/- ( Return at the end of the fourth year) 5900 Time is 5= + 5,900/- ( Return at the end of the fifth year) 5900 Apply the IRR formula As =IRR(A1:A6)= 8.9%.

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