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23 September, 14:28

Casa Del Sol Property Development Company is refurbishing a 200-unit condominium complex at a cost of $1,875,000. It expects that this will lead to expected annual cash flows of $415,350 for the next seven years. What internal rate of return can the firm earn from this project

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  1. 23 September, 14:44
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    12% internal rate of return can the firm earn from this project

    Explanation:

    Initial investment = $1,875,000

    Annual cash flows = $415,350

    Length of investment = n = 7 years

    To determine the IRR, the trial-and-error approach can be used.

    Set NPV = 0.

    Try IRR = 12.3%.
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