Josef Samir is an investor in the Egyptian Exchange (EGX). He invests E£5,000 (Egyptian pound) in...

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Finance

Josef Samir is an investor in the Egyptian Exchange (EGX). Heinvests E£5,000 (Egyptian pound) in a cement company and receivesdividends of E£65, 75, 76, and 76 over the next four years. At theend of the four years, he sells the stock for E£8,000. What is theIRR on this investment?

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4.1 Ratings (551 Votes)

IRR is that discount rate for which NPV = 0. It has to be found out by trial and error.
Year	Cash Flow	PVIF at 13%	PV at 13%	PVIF at 14%	PV at 14%
0	$ -5,000.00	1.00000	$ -5,000.00	1.00000	$ -5,000.00
1	$ 65.00	0.88496	$ 57.52	0.87719	$ 57.02
2	$ 75.00	0.78315	$ 58.74	0.76947	$ 57.71
3	$ 76.00	0.69305	$ 52.67	0.67497	$ 51.30
4	$ 8,076.00	0.61332	$ 4,953.16	0.59208	$ 4,781.64
			$ 122.09		$ -52.33
IRR lies between 13% and 14%. By simple interpolation IRR = 13%+1%*122.09/(122.09+52.33) =						13.70%

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Josef Samir is an investor in the Egyptian Exchange (EGX). Heinvests E£5,000 (Egyptian pound) in a cement company and receivesdividends of E£65, 75, 76, and 76 over the next four years. At theend of the four years, he sells the stock for E£8,000. What is theIRR on this investment?

Josef Samir is an investor in the Egyptian Exchange (EGX). He invests E£5,000 (Egyptian pound) in...

Free

50.1K

Verified Solution

Question

Finance

Josef Samir is an investor in the Egyptian Exchange (EGX). Heinvests E£5,000 (Egyptian pound) in a cement company and receivesdividends of E£65, 75, 76, and 76 over the next four years. At theend of the four years, he sells the stock for E£8,000. What is theIRR on this investment?

Answer & Explanation Solved by verified expert

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