SHOW FULL WORKING OUT, USING FORMULAS, NO TABLES, CORRECT ANSWER IRR = 10.26% pa or 10.3% pa (for starting value consider i* = 10% ---> NPV(10%) = 3.2831 AND NPV(11%) = -9.4207 A company invests £400,000 in a 4-year capital project. The project is expected to incur costs payable continuously throughout the first-year expenditure at an annual rate of £2,500. The net income payments from the project will be received half-way through each year, as follows: Year 1: £24,500 Year 2: £28,000 Year 3: £32,500 • Year 4: £35,000 Finally, it is assumed that the project can be sold on to another investor for £450,000 at the end of year 4. Calculate the annual internal rate of return resulting from this investment to the nearest 0.1%.
SHOW FULL WORKING OUT, USING FORMULAS, NO TABLES, CORRECT ANSWER IRR = 10.26% pa or 10.3% pa (for starting value consider i* = 10% ---> NPV(10%) = 3.2831 AND NPV(11%) = -9.4207 A company invests £400,000 in a 4-year capital project. The project is expected to incur costs payable continuously throughout the first-year expenditure at an annual rate of £2,500. The net income payments from the project will be received half-way through each year, as follows: Year 1: £24,500 Year 2: £28,000 Year 3: £32,500 • Year 4: £35,000 Finally, it is assumed that the project can be sold on to another investor for £450,000 at the end of year 4. Calculate the annual internal rate of return resulting from this investment to the nearest 0.1%.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...
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PLEASE, WRITE THE SOLUTIONS ON PAPER, EXPLAINING THE ENTIRE PROCESS, THE ONLY POSSIBLE SOLUTIONS ARE THE STIPULATED ONES
![SHOW FULL WORKING OUT, USING FORMULAS, NO TABLES, CORRECT ANSWER IRR = 10.26% pa or 10.3% pa (for starting value
consider i* = 10% ---> NPV(10%) = 3.2831 AND NPV(11%) = -9.4207
A company invests £400,000 in a 4-year capital project. The project is expected to incur
costs payable continuously throughout the first-year expenditure at an annual rate of £2,500.
The net income payments from the project will be received half-way through each year, as
follows:
Year 1:
£24,500
Year 2:
£28,000
Year 3:
£32,500
•
Year 4:
£35,000
Finally, it is assumed that the project can be sold on to another investor for £450,000 at the
end of year 4.
Calculate the annual internal rate of return resulting from this investment to the
nearest 0.1%.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F017b5c7e-49c0-46c7-a22b-9336d465c7c9%2Fd1ae95a7-dcb2-497c-bcc6-fbfe65a7bb66%2F5rn2xcl_processed.png&w=3840&q=75)
Transcribed Image Text:SHOW FULL WORKING OUT, USING FORMULAS, NO TABLES, CORRECT ANSWER IRR = 10.26% pa or 10.3% pa (for starting value
consider i* = 10% ---> NPV(10%) = 3.2831 AND NPV(11%) = -9.4207
A company invests £400,000 in a 4-year capital project. The project is expected to incur
costs payable continuously throughout the first-year expenditure at an annual rate of £2,500.
The net income payments from the project will be received half-way through each year, as
follows:
Year 1:
£24,500
Year 2:
£28,000
Year 3:
£32,500
•
Year 4:
£35,000
Finally, it is assumed that the project can be sold on to another investor for £450,000 at the
end of year 4.
Calculate the annual internal rate of return resulting from this investment to the
nearest 0.1%.
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