## Answers

9% | 12% | 14% | 15% | ||||||

Period | Cash Flow | Discountig Factor[1/(1.09^period)] | PV of cash flows(cash flow*discounting factor) | Discountig Factor[1/(1.12^period)] | PV of cash flows(cash flow*discounting factor) | Discountig Factor[1/(1.14^period)] | PV of cash flows(cash flow*discounting factor) | Discountig Factor[1/(1.15^period)] | PV of cash flows(cash flow*discounting factor) |

0 | -1819 | 1 | -1819 | 1 | -1819 | 1 | -1819 | 1 | -1819 |

1 | 0.9174312 | 0 | 0.8928571 | 0 | 0.877193 | 0 | 0.8695652 | 0 | |

2 | 0.84168 | 0 | 0.7971939 | 0 | 0.7694675 | 0 | 0.7561437 | 0 | |

3 | 0.7721835 | 0 | 0.7117802 | 0 | 0.6749715 | 0 | 0.6575162 | 0 | |

4 | 0.7084252 | 0 | 0.6355181 | 0 | 0.5920803 | 0 | 0.5717532 | 0 | |

5 | 0.6499314 | 0 | 0.5674269 | 0 | 0.5193687 | 0 | 0.4971767 | 0 | |

6 | 0.5962673 | 0 | 0.5066311 | 0 | 0.4555865 | 0 | 0.4323276 | 0 | |

7 | 0.5470342 | 0 | 0.4523492 | 0 | 0.3996373 | 0 | 0.375937 | 0 | |

8 | 5334 | 0.5018663 | 2676.95474 | 0.4038832 | 2154.313138 | 0.3505591 | 1869.881999 | 0.3269018 | 1743.6941 |

NPV = | 857.954736 | NPV = | 335.313138 | NPV = | 50.88199857 | NPV = | -75.30594 |

IRR is the rate of return at which NPV=0

Here, [email protected]% is positive and @15% is negative.

Therefore, IRR is between 14% and 15%

IRR = Rate at which positive NPV + [Positive NPV/(Positive NPV-Negative NPV)]

= 14% + [50.882/(50.882-(-75.30594)]

= 14% + [50.882/126.18794]

= 14% + 0.403% = **14.4%**

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