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A small manufacturing company had the cash flows shown below. Calculate a) the internal rate of return, and b) the external rate of return, using the reinvestment rate of 16% per year. Cash Flow, $ 1,000 Year 0 1 2 2345 3 - 90 +25 + 60 + 80 +40 - 15 Try i* and i' from 35% to 37%. Interpolate the results at least to 2 decimal places. Use Excel solution to verify the results obtained using the trial and error approach.

A small manufacturing company had the cash flows shown below. Calculate a) the internal rate of return, and b) the external rate of return, using the reinvestment rate of 16% per year. Cash Flow, $ 1,000 Year 0 1 2 2345 3 - 90 +25 + 60 + 80 +40 - 15 Try i* and i' from 35% to 37%. Interpolate the results at least to 2 decimal places. Use Excel solution to verify the results obtained using the trial and error approach.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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1. A small manufacturing company had the cash flows shown below. Calculate a) the internal rate of return, and b) the external rate of return, using the reinvestment rate of 16% per year. Cash Flow, $ 1,000 Year 012345 - 90 +25 + 60 + 80 +40 15 Try i* and i' from 35% to 37%. Interpolate the results at least to 2 decimal places. Use Excel solution to verify the results obtained using the trial and error approach.
Transcribed Image Text:1. A small manufacturing company had the cash flows shown below. Calculate a) the internal rate of return, and b) the external rate of return, using the reinvestment rate of 16% per year. Cash Flow, $ 1,000 Year 012345 - 90 +25 + 60 + 80 +40 15 Try i* and i' from 35% to 37%. Interpolate the results at least to 2 decimal places. Use Excel solution to verify the results obtained using the trial and error approach.
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