INTERNAL RATE OF RETURN ASSIGNMENTS
1. Given that the initial investment of a project is Rs. 60,000. Life of the asset is 4 years. The estimated cash flows are as follows:
- 1st-year Rs.15000
- 2nd year Rs. 20,000
- 3rd year Rs. 30,000
- 4th Year Rs. 20,000
Calculate the IRR
The answer should be ~ 14.5%
2. A company proposes to install a machine involving a capital cost of Rs. 3,60,000. The life of the machine is 5 years and its salvage value at the end of the life is nil. The machine will produce the net operating income after depreciation of Rs. 68,000 p.a. The company s tax rate is 45%. The NPV factors for 5 years are as follows:
| Year | 1 | 2 | 3 | 4 | 5 |
|---|---|---|---|---|---|
| Discounting Rate | 14 | 15 | 16 | 17 | 18 |
| Cumulative PV Factor | 3.43 | 3.35 | 3.27 | 3.20 | 3.13 |
You are required to calculate the IRR of the proposal
The answer should be ~ 15.74%
