Please show your work Answer the following short questions concerning the Intern
ID: 2621896 • Letter: P
Question
Please show your work
Answer the following short questions concerning the Internal Rate of Return (IRR). Your cost of capital (required rate of return) is 12%. Using the Internal Rate of Return criterion, should you accept this project? An investment has a time zero cost of $900,000 and produces after - tax cash flows of $144,000 in perpetuity. What is (are) the IRR (IRR's) of this investment? An investment of $190,000 produces a perpetual stream of cash flows. Next year, the cash inflow will be $47,250, and this will grow at 4% per year forever. What is (are) the IRR/ (IRR's) of this investment? Calculate the IRR (IRR's) of the following project:Explanation / Answer
a) The Cashinflows is to be pulled to Year 0 to Compare it with the CashOutflow and hence to take a decision. P.V of Cash Inflows=18000*PVIFA(12%,5) i.e equal to 64886.The Intial Investment being 72000,it is not a good investment to be made.