The financial manager at Genesis Company is looking into the purchase of an apartment complex for $550,000. Net after-tax cash flows are expected to be $65,000 for each of the next five years, then drop to $50,000 for four years. Genesis’ required rate of return is 9 percent on projects of this nature. After nine years, Genesis Company expects to sell the property for after-tax proceeds of $300,000. What is the internal rate of return (IRR) and net present value (NPV) on this project? IRR NPV A) 7.01% -$53,765 B) 6.66% -$64,170 C) 8.09% -$21,535 D) 13.99% $166,177

using CF solver on BAII Plus P, I got 6.66% so I guess it’ll be B) CF0 = -500,000 CF1-5 = 65,000 CF6-9 = 50,000 CF10 = 300,000 CPT IRR = 6.66%

The answer is A. The proceeds of $300,000 are received together with the cashflow for yr 9. But the question is not explicit.

ans a CFo=-550 CF1=65 F1=5 CF2=50 F2=3 CF3=350 F3=1 NPV I=9 CPT NPV ==> -53.765 IRR CPT = 7.01%

JOE2010 Wrote: ------------------------------------------------------- > The answer is A. > > The proceeds of $300,000 are received together > with the cashflow for yr 9. But the question is > not explicit. It is a bit misleading - “after 9 years” sort of implies ‘in the 10th year’

oh i see, yeah in that case its 7.01%.