An investment with an initial outlay of R500 000 generates five successive annual cash inflows of R75 000,R190 000,R40 000,R150 000 and R180 000respectively. The internal rate of return (IRR) is
The internal rate of return provides a discount that brings the present value of future cash flows equal to the initial cash investment. The exact internal rate of return can be determined by using the IRR function in an excel spreadsheet.
Calculating the internal rate of return (IRR):
Thus, the internal rate of return for the given investment is 7.78%.
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