Question

g the company expects to earn at least 18% per year on invested capital. Based on the projected cash flow, what is the ERR

Answer 1

Answer:

27%

Explanation:

Economic Rate of Return :  {[ Current Value - Cost ] / Cost } * 100

The Cash inflows for the project are $1,275,352 for the 3 years based on discounting rate of 18%.

The initial investment is $1,000,000.

ERR : {[$1,275,352 - $1,000,000 ] / $1,000,000 ] *100

ERR : 27% approximately