Engineering Board Exam Reviewer · Rate of Return Analysis · hard
A project costs P1,000,000 and returns P400,000 at the end of each of years 1 to 3 and P300,000 at the end of year 4. Find the rate of return.
- 12%
- 20%
- 17.5%
- 19.3%
Answer
D. 19.3%
Solution
Solve 0=-1,000,000+400,000(P/A,i,3)+300,000(P/F,i,4). At i=19% the net value is +P5,567.33 and at i=20% it is -P12,731.48. Interpolating gives i 19.30%.
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