Question

Calculate irr of a project costing rs. 15,00,000 which expects to produce cash benefits after tax of rs. 2,00,000 over a period of 12 years. (note : annual cash flow rs. 2,00,000).

Answer 1

Internal rate of return (IRR) of a project is a rate at which cash outflow is equated with cash inflows.

15,00,000= 2,00,000/(1+r) + 200,000/(1+r)2 + 200,000/(1+r)3 + ............200,000/(1+r)12

After solving this equation,

you will get IRR = 8.09%

Recommended to use financial calculators to solve these type of equations.