Question

Casa Del Sol Property Development Company is refurbishing a 200-unit condominium complex at a cost of $1,875,000. It expects that this will lead to expected annual cash flows of $415,350 for the next seven years. What internal rate of return can the firm earn from this project? (Do not round intermediate computations. Round final answer to the nearest percent.)

Answer 1

Answer:

12.34%

Explanation:

initial outlay = -$1,875,000

NCF year 1 = $415,350

NCF year 2 = $415,350

NCF year 3 = $415,350

NCF year 4 = $415,350

NCF year 5 = $415,350

NCF year 6 = $415,350

NCF year 7 = $415,350

using a financial calculator or an excel spreadsheet, IRR = 12.3.4%

the internal rate of return is the discount rate at which a project's NPV = 0