12-10. Continued Year Cash Flow PVE at 14% Present value $10,000 877 $8.770 9.000 769 6.921 6.500 675 4388 20.079 Step 5 Since the NPv is slightly over $20,000, we need to try a higher rate. We will try 15% Year Cash Flow PVE at 15% Present value $10000 870 $8,700 9.000 756 6804 3 6.500 658 4.277 $19,781 Because the nPv is now below $20000. we know the irr is between 14% and 15%. We will interpolate $20079PV@14%$20,079 PⅤ@14% 19781.PV@15%-20000.Cost $298 $79 14%+($79/$298)(1%)=265 14%+265(1%)=14.265%IRR The irR is 14.265% CopyrightC 2005 by The McGray-Hill Companies, Inc. S-432Copyright © 2005 by The McGraw-Hill Companies, Inc. S-432 12-10. Continued Year Cash Flow PVIF at 14% Present Value 1 $10,000 .877 $ 8,770 2 9,000 .769 6,921 3 6,500 .675 4,388 $20,079 Step 5 Since the NPV is slightly over $20,000, we need to try a higher rate. We will try 15%. Year Cash Flow PVIF at 15% Present Value 1 $10,000 .870 $ 8,700 2 9,000 .756 6,804 3 6,500 .658 4,277 $19,781 Because the NPV is now below $20,000, we know the IRR is between 14% and 15%. We will interpolate. $20,079...............PV @ 14% –19,781...............PV @ 15% $ 298 $20,079 ...............PV @ 14% –20,000...............Cost $ 79 14% + ($79/$298) (1%) = .265 14% + .265 (1%) = 14.265% IRR The IRR is 14.265%