This is the problem I am trying to solve. I know how to calculate basic IRR problems on my calculator already, I'm just not sure how to incorporate the yearly increase in sales into the equation when entering it into my calculator. Could somebody please write out what I need to type into the IRR finance function to get the answer (which is 10%).
THANKS!
A manufacturer of backpacks plans to introduce a new line. Equipment and production costs will be incurred immediately and will total $7,272,727. The company expects to earn a profit of $20 per backpack, and sales are estimated to be 100,000 in the first year (assume that the cash flow comes in at the end of the year). Sales are then expected to grow by 10% per year in each of thenext three years (in year 2, year 3, and year 4) but the price is expected to remain at $20 throughout. What is the internal rate of return of this project?
Answers & Comments
Verified answer
There are some really good business and finance related programs that will calculate a lot of these types of problems for you. You should be able to find some at:
http://calculatorti.com/ti_programs
Just click on ti-83 plus and then business/finance
Hope that helps.
You can actually use a normal calculator for that just use change of base log [base a] b = log b / log a So log[base 1.041](2) = log 2 / log 1.041 Now you can use your calculator You should get 17.25 Sorry i didn't answer your question. I really don't know what a TI-83 calculator is .