You are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone Thompson Ltd. is planning to establish a new factory overseas. Livingstone Thompson Ltd. have told you that the factory will run for six years and then be sold to a local entity. The Finance Department of Livingstone Thompson Ltd. has estimated the following yearly cash flows: Year Cash Flow (£) 0 -30,000,000 1 8,000,000 2 8,000,000 3 8,000,000 4 8,000,000 5 8,000,000 6 14,000,000 The Financial Manager of Livingstone Thompson Ltd. has decided that the company’s cost of capital of 15% is an appropriate hurdle rate for this project and informed you who will be providing the finance. Calculate the Internal Rate of Return (IRR)of this project.
You are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone Thompson Ltd. is planning to establish a new factory overseas. Livingstone Thompson Ltd. have told you that the factory will run for six years and then be sold to a local entity. The Finance Department of Livingstone Thompson Ltd. has estimated the following yearly cash flows:
|
Year |
Cash Flow (£) |
|
0 |
-30,000,000 |
|
1 |
8,000,000 |
|
2 |
8,000,000 |
|
3 |
8,000,000 |
|
4 |
8,000,000 |
|
5 |
8,000,000 |
|
6 |
14,000,000 |
The
- Calculate the
Internal Rate of Return (IRR)of this project. Record it step by step using the formulas
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