I’m not able to solve this problem, anyone help please. How to determine the cashflows? should we need to bring the cashflows to the end of year 3, or to the beginning of year 1? how to decide? Please explain.
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see while calculating MWROR we need to make sure that we are considering only cashflows that are invested and withdrawn and the ending value of the investment. dont pay attention to intermediate investment value.
here,
at t=0, we invest 1000, so put – 1000 as cf0
at t=1 , we invest 500 more, cf1 -500
at t=2 , we withdraw 200, cf2 200
at t=3 , the ending investment value is 1542
IRR CPT= 6.028
the ending value of inv can alternatively be calculated as follows:
1000 * 1.15 =1150
(1150+ 500)* 0.9 – 200= 1285
1285* 1.2 =1542
hope this helps
Thank you . now i got it.
Is it 6.02%?