Calculation Of Internal Rate Of Return, External Rate Of Return Of A Project
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Question
The estimated values of the yearly ATCF (after tax cash flows) of a Project are given in the Table below. The duration of the Project is six years. The initial cost of the Project is $2,800,000. MARR (the minimum attractive rate of return) is 12%.
|
End of year |
1 |
2 |
3 |
4 |
5 |
6 |
|
ATCF |
$620,000 |
$620,000 |
$620,000+$X |
$620,000 |
$620,000 |
$620,000+$Y |
Determine:
- the value of X that would make the IRR (internal rate of return) of the Project equal to 15% if Y = 3X
- the IRR (internal rate of return) of the Project if X = 400,000 and Y= 1,000,000
- the value of X that would make the ERR (external rate of return) of the Project equal to 15% if Y = 800,000
- the ERR (external rate of return) of the Project if X = Y = 800,000
- the value of X that would make the equivalent uniform annual value of the Project cash flow equal to $980,000 if Y = 4X
Summary
The question belongs to Finance and it discusses about calculation of internal rate of return, external rate of return and annual value of cash flow for a project.
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