Present-value factors for annuity of €1 for 5 years 22% 2.864 2.864 IRR – 2.857 24% 2.745 – Difference 0.119 0.007 0.007 IRR 22% (2%) Project D We need to find the discount rate at which Initial investment, €200,000 = PV of a year annuity of €200,000 per year deferred 5 years since the €200,000 of cash inflows are received in years 6–9. Trial and error At 18% At 20% At 22% €1 per year for 4 years 2.690 2.589 2.494 Multiply by €200,000, the total value of the annuity €538,000 €517,800 €498,80 0 Multiply by the present value of €1 5 years hence 0.437 0.402 0.370 PV of annuity in arrears €235,106 €208,156 €184,55 6 €208,156 – €200,000 IRR 20% + (2%) €208,156 – €184,556 €8,156 20% (2%) 20.7% €23,600
