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    oksanaMBA's Avatar
    oksanaMBA Posts: 3, Reputation: 1
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    #1

    Oct 25, 2009, 11:56 PM
    IRR,Internal rate of return
    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's Avatar
    ArcSine Posts: 969, Reputation: 106
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    #2

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



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