Question

Muscle Company is investing in a giant crane. It is expected to cost $6.5 million in initial investment, and it is expected to generate an end-of-year cash flow of $3.0 million each year for three years. Calculate the IRR.

Answer 1

18.22%

Step-by-step explanation:

The Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.

The IRR can be calculated using a financial calculator

Cash flow for year 0 =$-6.5 million

Cash flow for year one to three = $3.0 million

IRR = 18.22%

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