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27 April, 11:41

A company is considering an iron ore extraction project that requires an initial investment of $1,000,000 and will yield annual cash flows of $350,263 for 4 years. The company's hurdle rate is 9%. Calculate IRR. Present Value of an Annuity of $1 5% 6% 7% 8% 9% 10% 15% 1 0.952 0.943 0.935 0.926 0.917 0.909 0.870 2 1.859 1.833 1.808 1.783 1.759 1.736 1.626 3 2.723 2.673 2.624 2.577 2.531 2.487 2.283 4 3.546 3.465 3.387 3.312 3.240 3.170 2.855 5 4.329 4.212 4.100 3.993 3.890 3.791 3.352 A. 15% B. 10% C. 18% D. 12%

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  1. 27 April, 11:50
    0
    A. 15%

    Explanation:

    Period Cash Flow

    0 - 1000000

    1 350263.00

    2 350263.00

    3 350263.00

    4 350263.00

    IRR 0.15000

    Using the financial calculator you can solve for IRR

    also you can try to find it doing

    investment/cash flow = annuity factor

    1,000,000/350,263 = 2.85499753

    If you look for this value in the table you will find n=4 and rate = 15% 2.855

    which is really close to the division we made, so you can say it is 15% without doing the math, if you udnerstand how the table work
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Home » Business » A company is considering an iron ore extraction project that requires an initial investment of $1,000,000 and will yield annual cash flows of $350,263 for 4 years. The company's hurdle rate is 9%. Calculate IRR.
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