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Solve for the 2 IRR's with a financial calculator when the NPV equals zero: I...

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Finance

Solve for the 2 IRR's with a financial calculator when the NPV equals zero: I know the first answer is 25% and the second is 400%, however, I am unsure how to find the 400% on a financial calculator. image

To illustrate multiple IRRs, suppose a firm is considering a potential strip mine (Project M) that has a cost of $1.6 million and will produce a cash flow of $10 million at the end of Year 1 . Then at the end of Year 2, the firm must spend $10 million to restore the land to its original condition. Therefore, the project's expected cash flows (in millions) are as follows: We can substitute these values into Equation 11.2 and solve for the IRR: NPV=(1+IRR)0$1.6million+(1+IRR)1$10million+(1+IRR)2$10million=0 To illustrate multiple IRRs, suppose a firm is considering a potential strip mine (Project M) that has a cost of $1.6 million and will produce a cash flow of $10 million at the end of Year 1 . Then at the end of Year 2, the firm must spend $10 million to restore the land to its original condition. Therefore, the project's expected cash flows (in millions) are as follows: We can substitute these values into Equation 11.2 and solve for the IRR: NPV=(1+IRR)0$1.6million+(1+IRR)1$10million+(1+IRR)2$10million=0

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