MaryLou182 Posts: 5, Reputation: 1 New Member #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 Posts: 969, Reputation: 106 Senior Member #2 Dec 22, 2009, 02:02 PM
$120,000 \ = \ 60,000(1 + r)^{10}$

Solve for r.
 MaryLou182 Posts: 5, Reputation: 1 New Member #3 Dec 22, 2009, 02:05 PM

Oooo!
How do I do that!
 ArcSine Posts: 969, Reputation: 106 Senior Member #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.

 Question Tools Search this Question Search this Question: Advanced Search

## Check out some similar questions!

Internal Rate of Return [ 1 Answers ]

Could anybody provide me the equation of internal rate of return with an example?

CAM Company is evaluating a project requiring a capital expenditure of \$619,200. The project has an estimated life of four years and no salvage value. The estimated net income and net cash flow from the project are as follows: Year Net Income ...

what do we mean by internal rate of return, net present value and average annual return on investments? What do they imply? And, how are they computed?

Internal rate of return [ 1 Answers ]

Brandon buys a golf course on January 1, 2008 for \$10 million. He borrows \$6 million from a bank at 8% interest fixed with a 20 year amortization on the debt. The other \$4 million is his money and he Puts this as cash or "investment" in the deal. After all expenses and paying the...