328
PART 3: CAPITAL BUDGETING
example
FIGURE 9.5A IRR OF GLOBAL UNTETHERED’S PROJECTS ($ MILLIONS): WESTERN EUROPE PROJECT
0 1 2 3 4 5
End of year
NPV = $0
IRR = 27.8%
–$250 $35 $80 $130 $160 $175
IRR?
IRR?
IRR?
IRR?
IRR?
250
Calculator
Input Function
2nd CLR TVM
CLR WORK
CF
2nd
35 ENTER
–250 ENTER
80 ENTER Solution 27.8
130 ENTER
160 ENTER
175 ENTER
IRR
CPT
Formula B7:
IRR(BI:B6)
IRR 27.8%
Cash flow 2
–250
35
80
Cash flow 1
Cash flow 0
Row
Column
Spreadsheet
1
2
3
4 Cash flow 3 130
5 Cash flow 4 160
(^6) Cash flow 5 175
7
8
A B
FIGURE 9.5B IRR OF GLOBAL UNTETHERED’S PROJECTS ($ MILLIONS): SOUTH-EASTERN AUSTRALIA PROJECT
The internal rate of return (IRR) for Global Untethered’s South-eastern Australia project is 36.7%, which is the discount rate
that causes the project’s cash flow to have an NPV of $0.
0 1 2 3 4 5
End of year