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sweet-ann
6 days ago
5

An investment of $210 produces a perpetual stream of cash inflows. Next year, the cash inflow will be $10.50, and the cash inflo

w will grow at 5% per year. What is the internal rate of return on this investment?
Business
1 answer:
soldi70 [3.4K]6 days ago
8 0

Answer:

The internal rate of return for this investment stands at 10%.

Explanation:

This rate represents the discount rate at which the present value of the continuous cash inflows matches the initial investment amount of $210.

We utilize the formula for deriving the present value of a growing perpetuity to ascertain the internal rate of return, referred to as X in the equation below:

10.5/ ( X - 5%) = 210 <=> X - 5% = 10.5 / 210 = 5% <=> X = 5% + 5% = 10%.

Thus, the internal rate of return for this investment is 10%.

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Explanation:

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Answer:

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