Show formula that is used in excel sheet 2 IRR CALCULATIONS

Show formula that is used in excel sheet.

2 IRR CALCULATIONS Determine the IRR on the following projects: a. An initial outlay of S10,000 resulting in a single free cash flow of S17,182 after 8 years. b. An initial outlay of $10,000 resulting in a single free cash flow of $48,077 after 10 years. c. An initial outlay of S10,000 resulting in a single free cash flow of S114,943 after 20 years. 4 d. An initial outlay of S10,000 resulting in a single free cash flow ofs13,680 after 3 years. 6 SOLUTION 7 a. An initial outlay of $10,000 resulting in a single free cash flow of S17,182 after 8 8 Initial outlay 9 Future value 10 Years $10,000 S17,182 IRR 12 13 b. An iniialolay of S10,000 resulting in a single free cash flow of $48,077 after 10 years. 14 Initial o 15 Future value 16 Years 17 IRR 18 19 c. An initial outlay of $10,000 resulting in a single free cash flow of S114,943 after 20 years. 20 Inial outlay 21 Future value 22 Years 23 IRR 24 $10,000 $48,077 10 $10,000 $114,943 20 25 d. An inialolay of S10,000 resulting in a single free cash flow of $13,680 after 3 26 Initial o 27 Future value 28 Years 29 IRR 30 $10,000 S13,680

Solution

IRR is rate at which NPV is 0, This can be found as under
FV = PV(1+r)^n
A)
17182 = 10000(1+r)^8
1.7182=(1+r)^8
Assuming r = 7%
(1.07)^8 = 1.7182
Thus IRR = 7%
B)
48077 = 10000(1+r)^10
4.8077=(1+r)^10
Assuming r = 17%
(1.17)^10 = 4.807
Thus IRR = 17%
C)
114943 = 10000(1+r)^20
11.4943=(1+r)^20
Assuming r = 12.986%
(1.12986)^20 = 11.494
Thus IRR = 12.986%
D)
13680 = 10000(1+r)^3
1.3680=(1+r)^3

Assuming r = 11%
(1.11)^3 = 1.368
Thus IRR = 11%