This question will require you to use Excel’s IRR function. A firm invests $100,000 in a project today. It receives $15,000 a year from now, $20,000 two years from now, and $95,000 three years from now and nothing more. What is the IRR of the project?
The format of Excel’s IRR function is =IRR(aX:aY,Z)
Where aX:aY are cells aX to aY which have cash flows entered into them. The initial investment is a negative cash flow so it should have a negative sign.
Z is a “guess” IRR, usually you can set to 0.1 (which is 10%).
Express your answer as a percentage; for example, the answer 3.18% should be entered as 3.18 without the % sign.