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    MaryLou182's Avatar
    MaryLou182 Posts: 5, Reputation: 1
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    #1

    Dec 22, 2009, 01:52 PM
    internal rate of return question 4
    Investment now = 60,000.
    Cash return at the end of year 10 = 120,000.

    Calculate the Internal Rate of Return
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
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    #2

    Dec 22, 2009, 02:02 PM


    Solve for r.
    MaryLou182's Avatar
    MaryLou182 Posts: 5, Reputation: 1
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    #3

    Dec 22, 2009, 02:05 PM

    Oooo!
    How do I do that!
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
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    #4

    Dec 22, 2009, 02:13 PM
    4 steps...

    • Divide both sides by 60K
    • Take the 10th root of both sides (you'll need a calculator which handles fractional roots, or Excel, or something similar)
    • That leaves you with (1 + r) on the RHS, so deduct "1" from both sides
    • Call it a day

    Alternatively, just keep hitting the right-hand side of my initial equation with different values for r, trial-and-error style, until the result is close enough to 120K.

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