CMA Study Group

hello dears

when i solve an question in npv irr i found this solution as it is
mules initial investment / net cash flows = 1000/250 =  4
on the 8 years line the factor of 4 indicates a rate of retuen of approxmaitly 18.7% 

how he get the 18.70% from the info 4

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Sameh Mahmoud Ismail
Accountant
Giza
Egypt
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Hello Sameh,

From above problem, cash inflow is uniform for 4years, Hence present value annuity factor is used.

Here, we know number of years is 8years and by dividing initial investment /net cash flow = present value annuity factor.

search in present value annuity factor for 8th year as PVIFA =4, corresponding rate of interest is approx 18%.

hope your query is addressed.


Regards,
Meena

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Meena M
Accountant
GOWDANPALYA
India
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