Question #274417

. 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?

Expert's answer

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\\%"

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