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Popular Word Problems >

A project requiring an initial outlay of 55000 is guaranteed to produce a return of 75000 in three years' time. Calculate the internal rate of return.

Solution

A p ro j ec t re q u i r in g an ini t ia l o u tl a y o f 55000 i s gu a r an t ee d t o p ro d u ce a re t u r n o f 75000 in t h ree ye a r s^{'} t im e . C a l c u l a t e t h e in t er na l r a t e o f re t u r n .

Solution

Rate : 12.12121 \dots %

Solution steps

Translate the problem into an equation:

75000 = 55000 (1 + r \cdot 3)

Solve for

r, 75000 = 55000 (1 + r \cdot 3) : r = 12.12121 \dots %

Rate : 12.12121 \dots %

Popular Examples

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