Assignment - Internal Rate of Return

Try out this internal rate of return practice problems

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:

 

Year12345
Discounting Rate1415161718
Cumulative PV Factor3.433.353.273.203.13

You are required to calculate the IRR of the proposal

The answer should be ~ 15.74%

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