Consider two streams of cash flows, A and B. Stream A’s first cash flow is $9,900 and is received three years from today. Future cash flows in stream A grow by 4percent in perpetuity. Stream B’s first cash flow is $-9,000, is received two years from today, and will continue in perpetuity. Assume that the appropriate discountrate is 12 percent. I found the PV (Question A) but am having no luck find the IRR in % that is considered correct for my assignment.(a)What is the present value of each stream?Stream PVA $B $(b) This is where I'm stuck.Suppose that the two streams are combined into one project, called C . What is the IRR of project C? Round your answer to 2 decimal places. (e.g., 32.16))IRR %
a) PV of stream A = 9900/((0. 04) *1. 12^3) = 176165.61 PV of stream B = -9000/(0.04*1. 12^2)= -179368.62 You can see like this for IRR. Year 2 end inflow of -9000/. 04 = -225000 Year 3 end inflow of 9900/. 04 = 2475000 So IRR equation is 225000 = 247500/ (1 + IRR) or IRR = 10% Nice question... hoping my answer is correct.
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