Screenshot 285 pngPhotos See all photos Edit Create Share A

Screenshot (285) png-Photos See all photos Edit & Create Share Add to a creation island rather than selling it for $24? First cost Guarantee period, in m For the following diagram, compute the interest rate at which the costs are equivalent to the benefits 7-24 Jean believes the batteries for the guarantee period. S extra money in a battery u rate of return. If she plan another 2 years, which ba 80 80 8080 80 80 0 200 200 200 0 Type here to search 848 PM 2/4/2018

Solution

Interest Rate at which the PV of Inflow = PV of outflow is called IRR (Internal Rate Of return) IRR = Rate at which NPV = 0 i.e. Outflow = Inflow Outflow = 200 at t = 2,4,6 Inflow = 80 each year By hit and trial method - NPV becomes 0 at r = 50% Year Inflow Outflow Net cashflow PV factor @ 50% PV of cash flow 1 80 0 80 0.666667 53.33333 2 80 200 -120 0.444444 -53.3333 3 80 0 80 0.296296 23.7037 4 80 200 -120 0.197531 -23.7037 5 80 0 80 0.131687 10.53498 6 80 200 -120 0.087791 -10.535 NPV = 0 Hence proved. Or You can find the NPV using two random rates and use linear interpolation or extrapolation to find the rate. Please provide feedback…. Thanks in advance…. :-)