Problem:
The estimated values of the yearly ATCF (after tax cash flows) of a Project are given in the Table below. The duration of the Project is six years. The initial cost of the Project is $2,800,000. MARR (the minimum attractive rate of return) is 12%.
|
End of year
|
1
|
2
|
3
|
4
|
5
|
6
|
|
ATCF
|
$620,000
|
$620,000
|
$620,000+$X
|
$620,000
|
$620,000
|
$620,000+$Y
|
Determine:
- the value of X that would make the IRR (internal rate of return) of the Project equal to 15% if Y = 3X
- the IRR (internal rate of return) of the Project if X = 400,000 and Y= 1,000,000
- the value of X that would make the ERR (external rate of return) of the Project equal to 15% if Y = 800,000
- the ERR (external rate of return) of the Project if X = Y = 800,000
- the value of X that would make the equivalent uniform annual value of the Project cash flow equal to $980,000 if Y = 4X
Additional Information:
This question is basically belongs to Finance as well as it explains about computation of internal rate of return, external rate of return and annual value of cash flow for a project.