Suppose an industrial building can be purchased for $2,500,000 and is expected to yield cash flows of $180,000 in each of the next five years. (Note: assume payments are made at end of year.) If the building can be sold at the end of the fifth year for $2,800,000, calculate the IRR for this investment over the five-year holding period.

9.20%

Explanation:

Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.

IRR can be calculated using a financial calculator

Cash flow for year zero = - $2,500,000

Cash flow each year from year one to four = $180,000 

Cash flow in year five = $180,000 + $2,800,000 = $2,980,000

IRR = 9.20%

To find the IRR using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.

I hope my answer helps you

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.