Julian Stewart invested $250,000 in a limited partnership to drill for natural gas. His investment yielded annual returns of $45,000 the first year, followed by annual increases of $10,000 until the 6th year, at which time an additional $150,000 had to be invested for deeper drilling. Starting in the seventh year, following the supplemental investment, the annual returns decrease by $10,000 annually from $85,000 to $5,000. What is the IRR of Julian’s investment when future worth is maximized?
Julian Stewart invested $250,000 in a limited partnership to drill for natural gas. His investment yielded annual returns of $45,000 the first year, followed by annual increases of $10,000 until the 6th year, at which time an additional $150,000 had to be invested for deeper drilling. Starting in the seventh year, following the supplemental investment, the annual returns decrease by $10,000 annually from $85,000 to $5,000. What is the IRR of Julian’s investment when future worth is maximized?
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
Problem 1PS
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Julian Stewart invested $250,000 in a limited partnership to drill for natural gas. His investment yielded annual returns of $45,000 the first year, followed by annual increases of $10,000 until the 6th year, at which time an additional $150,000 had to be invested for deeper drilling. Starting in the seventh year, following the supplemental investment, the annual returns decrease by $10,000 annually from $85,000 to $5,000. What is the IRR of Julian’s investment when future worth is maximized?
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