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Feb 10

# Calculate IRR? ?

LucAn Bakeries is considering to expand its presence in central zone by setting up afacility in Morogoro region. An investment of Tshs 5,000,000 is expected to produce aconstant annual cash flow of Tshs 1,716,000 for the next four years.Calculate the IRR??

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Feb 10
To calculate the Internal Rate of Return (IRR), you need to have a series of cash flows and the initial investment. The IRR is the discount rate that makes the net present value (NPV) of the cash flows equal to zero.

Here's an example:

Initial Investment: -\$10,000
Cash Flow Year 1: \$3,000
Cash Flow Year 2: \$4,000
Cash Flow Year 3: \$5,000

To calculate the IRR, you can use a financial calculator or a spreadsheet software like Microsoft Excel. In Excel, you can use the IRR function.

In this example, the cash flows are -\$10,000, \$3,000, \$4,000, and \$5,000. You can enter these values into Excel as follows:

Cell A1: -10000
Cell A2: 3000
Cell A3: 4000
Cell A4: 5000

In cell A5, you can use the IRR function to calculate the IRR:

=IRR(A1:A4)

After entering this formula, Excel will calculate the IRR, which in this case is approximately 20.9%.

Therefore, the IRR for this investment is approximately 20.9%.
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