A four-year life project has an initial capital expenditure of $3,000 and annual operating costs beginning at the end of the year 1 of $2,000. At the end of the years of 2, 3, and 4 the project receives $7,000 as income. Assume that the cash flows given are in today dollars, and that incomes are escalated at 5%, costs are escalated at 6%. and inflation is 3%. Calculate the IRR in constant dollar. O 57% O 25% O 34% O 15%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A four-year life project has an initial capital expenditure of $3,000 and annual
operating costs beginning at the end of the year 1 of $2,000. At the end of the years
of 2, 3, and 4 the project receives $7,000 as income. Assume that the cash flows given
are in today dollars, and that incomes are escalated at 5%, costs are escalated at 6%,
and inflation is 3%. Calculate the IRR in constant dollar.
O 57%
O 25%
O 34%
O 15%
Transcribed Image Text:A four-year life project has an initial capital expenditure of $3,000 and annual operating costs beginning at the end of the year 1 of $2,000. At the end of the years of 2, 3, and 4 the project receives $7,000 as income. Assume that the cash flows given are in today dollars, and that incomes are escalated at 5%, costs are escalated at 6%, and inflation is 3%. Calculate the IRR in constant dollar. O 57% O 25% O 34% O 15%
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