Question

Quick Sale Real Estate Company is planning to invest in a new development. The cost of the project will be $23 million and is expected to generate cash flows of $14,000,000, $11,750,000, and $6,350,000 over the next three years. The company's cost of capital is 20 percent. What is the internal rate of return on this project?

Answer 1

IRR= 22%

Step-by-step explanation:

The Internal Rate of Return (IRR) is a measure of how profitable is the money that remains invested during the life of a proyect. It is also known as the discount rate that makes the Net Present Value (NPV) equal to cero.

The manual formula is attached to this answer but i used excel:

First we create the free cash flow: table attached. The first item in the moment or year 0 is the investment and this is always a negative flow.

Then we search in the finantial formulas the IRR and use it in this way : "=IRR(C3:C6)"