Answer:
IRR of this project is 19.5%.
Explanation:
The internal rate of return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
The internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.
0 = - 406,152 +[tex]\frac{134,378}{(1+r)} + \frac{134,378}{(1+r)^{2} } + \frac{134,378}{(1+r)^{3} } +\frac{134,378}{(1+r)^{4} } +\frac{134,378}{(1+r)^{5} }[/tex]
we will find IRR by substitution such that the RHS of the equation is equal to zero.
in this case the value for r which will make the equation zero is = 0.195
= IRR of this project is 19.5%.
