Consider the following project.
Costs: $100,000, at time t = 0.
$45,000, at time t = 4.
Income: Three payments of $10,000, each one year apart, with the first payment at time t = 1.
Four payments of $60,000, each paid every 4 years apart, with the first payment at time t = 4.5.
a.Write down an equation that you need to solve in order to calculate the internal rate of return for this project.
b.Calculate or state the NPV of this project, at a discount rate that solves the equation you wrote down in (a) above.
Part(a) is pretty straight forward. Let NPV = 0. Then I can get my corresponding equations. However; for part (b). Should the NPV equal to 0? Since IRR stnads when NPV = 0.
