The IRR of this opportunity is 22.1043%
=(Future Value/Present Value)^(1/t)-1
=(9500/3500)^(1/5)-1
=22.1043%
If the IRR of funding is better than its opportunity cost of capital, the funding has a fine NPV. It "creates cost". It's far well worth considering. However, if the IRR of an investment is decrease than its opportunity cost of capital, the investment represents price destruction, and ought to be discarded.
Broken down, every duration's after-tax cash waft at time t is discounted via a few charge, r. The sum of a majority of these discounted cash flows is then offset by means of the preliminary investment, which equals the current NPV. To locate the IRR, you would want to "opposite engineer" what r is needed so that the NPV equals 0.
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