It projects
that it will increase profits by $100 in Year 1, $200 in Year 2, and $300 in Year 3. Calculate the IRR of
the proposed project.
Period
0
1
2
3
IRR
Cash Inflow
$500
$100
$200
$300
8%
$1250
$2500
9%
Number of Periods
8.04
3. Shoes for You's will expect to invest $500,000 for the development of their new product. The company
estimates that the first year cash flow will be $200,000; the second year cash flow will be $300,000, and
the third year cash flow to be $200,000. The expected return of 10% is used as the discount rate.
Annual Discount Rate
Initial Investment
1st Year Return
2nd Year Return
3rd Year Return
Net Present Value
10%
$500,000
$200,000
$300,000
$200,000
$80,015.02