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An investment is expected to produce the following annual year-end cash flows: year 1: $5,000 year...

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Finance

An investment is expected to produce the following annualyear-end cash flows: year 1: $5,000 year 4: $5,000 year 2: $1,000year 5: $6,000 year 3: $0 year 6: $863.65 The investment will cost$13,000 today. I got that IRR is 10%

Prove your answer for IRR by showing how much of each year’scash flow is recovery of the $13,000 investment and how much of thecash flow is return on investment. (Hint: See Exhibit 3–13 andConcept Box 3.2.)

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4.3 Ratings (968 Votes)
For the given series of Cash Flows IRR 10 So this means every year we get 10 return on the investment compounded yearly So at the end of 1st year we should get 1300010 1300 But we get 5000 So 1300 is return on investment and remaining 50001300 3700 is the recovery of investment So remaining    See Answer
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