Answer to Question #274417 in Finance for ALI

Question

. If you like to buy a new equipment for $13000 and you receive a cash inflow of $ 2500 per year for 10 years. What is the internal rate of return?

Answer 1

Net Present Value:

$NPV=\sum\frac{CF_t}{(1+r)^t}=13000$

where CF_t is cash inflow during a single period t,

r is internal rate of return

so, we have:

$\sum\frac{2500}{(1+r)^t}=13000$

t= 10 years

using online calculator https://www.calculatestuff.com/financial/irr-calculator, we get:

$r=14.08\%$