Use Microsoft Excel to assess the internal rate of return for an IT initiative. Suppose the initial investment is $60,000. The returns on investment in dollars for the following 5 years are (a) $10,000, (b) $12,000, (c) $15,000, (d) $21,000, and (e) $26,000. Use the IRR function to compute the internal rate of return after 2, 4, and 5 years. Next, assume that the loan for the initial $60,000 is at 8 percent and you are earning 16 percent on the annual returns. Use the MIRR function to calculate the internal rate of return. Required: 1. What is the Internal Rate of Return after 2 years? -46% -20% -1% -10% Required: 2. What is the Internal Rate of Return after 4 years? -46% -20% -1% 10% Required: 3. What is the Internal Rate of Return after 5 years? 10% 16% 8% 20%

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 8TP: Fenton, Inc., has established a new strategic plan that calls for new capital investment. The...
Question
Use Microsoft Excel to assess the internal rate of return for an IT initiative. Suppose the initial investment is
$60,000. The returns on investment in dollars for the following 5 years are (a) $10,000, (b) $12,000, (c) $15,000,
(d) $21,000, and (e) $26,000. Use the IRR function to compute the internal rate of return after 2, 4, and 5 years.
Next, assume that the loan for the initial $60,000 is at 8 percent and you are earning 16 percent on the annual
returns. Use the MIRR function to calculate the internal rate of return.
Required:
1. What is the Internal Rate of Return after 2 years?
-46%
-20%
-1%
-10%
Required:
2. What is the Internal Rate of Return after 4 years?
-46%
-20%
-1%
10%
Required:
3. What is the Internal Rate of Return after 5 years?
10%
16%
8%
20%
Transcribed Image Text:Use Microsoft Excel to assess the internal rate of return for an IT initiative. Suppose the initial investment is $60,000. The returns on investment in dollars for the following 5 years are (a) $10,000, (b) $12,000, (c) $15,000, (d) $21,000, and (e) $26,000. Use the IRR function to compute the internal rate of return after 2, 4, and 5 years. Next, assume that the loan for the initial $60,000 is at 8 percent and you are earning 16 percent on the annual returns. Use the MIRR function to calculate the internal rate of return. Required: 1. What is the Internal Rate of Return after 2 years? -46% -20% -1% -10% Required: 2. What is the Internal Rate of Return after 4 years? -46% -20% -1% 10% Required: 3. What is the Internal Rate of Return after 5 years? 10% 16% 8% 20%
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