Calculation Of Internal And External Rate Of Return For A Project

Question

The estimated cash flow of Project XP-05/3 is given below:

End of year

0

1

2

3

4

Cashflow, $

-X

Y

Y+$400,000

Y+$800,000

Y+$1.200,000

The interest rate is v %.

Determine:

  • the present value of the cash flow, if X = $2,000,000, Y = $1,000,000 and v = 8 % monthly compounding
  • the equivalent annual value of the cash flow, if X = $2,000,000, Y = $500,000 and v = 12 % yearly compounding
  • the value of Y, if the internal rate of return of the cash flow is 10% and X = $3,000,000
  • the external rate of return of the cash flow, if X = $2,500,000, Y = $500,000 and the re-investment rate is 10 % yearly compounding
  • the internal rate of return of the cash flow, if X = $4,600,000 and Y = $1,000,000

Summary

The question belongs to Finance and it discusses about calculation of present value, annual value, internal and external rate of return for a project.

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