This is from the comprehensive quest from alternative investments, q 3, part c. the solution says “with a down payment od $2.1 and three after tax cash flows, we get IRR=14.4%” i.e CFo= -2100000 CF1= 188532 (after tax cash flows calculated) CF2= 202206 CF3= 216236 CPT IRR is not equal to 14.14%? How did we get 14.14% Thanks
I think your after tax cash flows are incorrect. I get that the IRR of the cash flows provided is -42.76% Think about what IRR is - Internal Rate of return to the project. In hard dollar terms, if you pay 2.1M and you get back ~ .2M only 3X, you are losing quite a bit of money, thus IRR would be nowhere near 14%.