Shrewd Endeavors, Inc., invested $70,000 in a business venture with the following cash flow results: MARR is 10%. Determine the internal rate of return and whether or not this is a desirable venture. ΕΟΥCFΕΟΥ CF0 -$70,000 11 10,000120,000 129,000219,000 138,000318,000 147,000417,000 156,000516,000 165,00015,000 174,000714,000 18 3,000813,000 192,00012,000 201,0001011,000

EOY Cash Flow Factor PV - -70,000 1.000 -70,000…

ΕΟΥ CF ΕΟΥ CF 0 -$70,000 11 10,000 1 20,000 12 9,000 2 19,000 13 8,000 3 18,000 14 7,000 4 17,000 15 6,000 5 16,000 16 5,000 15,000 17 4,000 7 14,000 18 3,000 8 13,000 19 2,000 12,000 20 1,000 10 11,000

ΕΟΥ CF ΕΟΥ CF 0 -$70,000 11 10,000 1 20,000 12 9,000 2 19,000 13 8,000 3 18,000 14 7,000 4 17,000 15 6,000 5 16,000 16 5,000 15,000 17 4,000 7 14,000 18 3,000 8 13,000 19 2,000 12,000 20 1,000 10 11,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Shrewd Endeavors, Inc., invested $70,000 in a business venture with the following cash flow results: MARR is 10%. Determine the internal rate of return and whether or not this is a desirable venture.

ΕΟΥ
CF
ΕΟΥ CF
0 -$70,000 11 10,000
1
20,000 12
9,000
2
19,000 13
8,000
3
18,000 14
7,000
4
17,000 15
6,000
5
16,000 16
5,000
15,000 17
4,000
7
14,000 18 3,000
8
13,000 19
2,000
12,000 20
1,000
10
11,000

Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.

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