The IRR (compounded annually) on this investment is 10%.
Explanation:
The formula to compute IRR on this investment:
\begin{aligned} &NPV = \frac {CF_0}{(1 + r)^0} + \frac {CF_1}{(1 + r)^1} + \frac {CF_2}{(1 + r)^2} + \frac {CF_3}{(1 + r)^3}\\ \end{aligned}NPV=(1+r)0CF0+(1+r)1CF1+(1+r)2CF2+(1+r)3CF3
13000 = 0 +5000(1 +r)1+1000(1 +r)2+0(1 +r)3+5000(1 +r)4+6000(1 +r)5+863.65(1 +r)6
Solve the equation using calculator:
r = 10%
