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Calculation Of Internal Rate Of Return External Rate Of Return And Shortest Duration For Project Of A Project

Question

Your company intends to establish a division in Halifax to be engaged in computer software development for the pharmaceutical industry The estimated yearly costs of the Project are given below.

End of year

0

1

2

3

4

n

Costs, $103

2,500

600

600

600

600

600

The anticipated amount of yearly income generated by the Project m its first year is $X and this amount is expected to mcrease by x % m each of the following years during the n year life of the Project MARR (the minimum attractive rate of return) for the company is y %

Determine

  • the internal rate of return if X = 1,270,000, x = 0, and n = 5
  • the external rate of return if X = 1,000,000 x = 10, y = 12, and n = 8
  • the minimum value of X that would make the Project acceptable if x = 0, y = 15, andn= 10
  • the maximum value of MARR that would make the Project acceptable if X = 1,150,000, x = 0, and n = 6
  • the shortest duration of Project life (in years) that would make the Project acceptable if X = 1,400,000, x = 0, and y = 12

Summary

The question belongs to Finance and it discusses about calculation of internal rate of return, external rate of return and shortest duration of a project.

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