
Concept explainers
Here,
Expected net cash flow in Period t is “
Required
IRR of a project is calculated using a financial calculator. All financial calculators have an inbuild cash flow register, Cash flows in accordance of the timeline and with proper +/- signs should be input, then press the key labelled “IRR”. It will return the internal rate of return of the project.
The project has an initial cost of $75,000 and is expected to generate after tax cash flow of $26,000 per year for four years. Required rate of return is 14%.

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