Ask Experts Questions for FREE Help!
 

Free Answers in 3 Easy Steps

Register Now
3 Steps
 


Ask QuestionsprogressAnswer QuestionsprogressBuild ReputationprogressBecome an Expert
 
At Ask Me Help Desk you can ask questions in any topic and have them answered for free by our experts. To ask questions or participate in answering them you must register for a free account. By registering you will be able to:
  • Get free answers from experts in any of our 300+ topics.
  • Accept money for answers that you provide.
  • Communicate privately with other members (PM).
  • See fewer ads.
  Answer this Question    Ask about Finance & Accounting    Ask about another Subject  
 

oksanaMBA
Oct 25, 2009, 11:56 PM
An investment of $210 produces a perpetual stream of cash inflows. Next year, the cash inflow will be $10.50, and the cash inflow will grow at 5% per year. What is the internal rate of return on this investment?

ArcSine
Oct 26, 2009, 05:58 AM
You can use the "constant-growth" model, appropriately rearranged, to solve for the internal yield r:

P_0 \ =\ \frac{d_1}{r-g}

...where P_0 denotes the asset's present value; d_1 is the expected cash flow one period away; and r and g are the asset's yield and cash-flow growth rate, respectively.