Determine the Rate of Return of the Following Cash Flow

question 14

Short Answer

Determine the rate of return of the following cash flow using the ERR method and the reinvestment rate of 4% per year. $$\begin{array} { | l | l | l | l | l | l | } \hline\text { Year } & \text { Expense, } \$ & \text { Revenue, } \$ & \text { Year } & \text { Expense, } \$ & \text { Revenue, } \$ \\\hline 0 & 140,000 &- & 6 & 32,000 & 82,000 \\\hline 1 & 32,000 & 47,000 & 7 & 32,000 & 89,000 \\\hline 2 & 32,000 & 54,000 & 8 & 32,000 & 96,000 \\\hline 3 & 32,000 & 61,000 & 9 & 32,000 & 103,000 \\\hline 4 & 32,000 & 68,000 & 10 & 32,000 & 110,000 \\\hline 5 & 32,000 & 75,000 & 11 & 32,000 & 117,000 \\\hline\end{array}$$

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Definitions:

Price Change

Refers to the variance in the cost of goods or services over time, which can be an increase or a decrease.

Market Quantity

The total amount of a specific good or service that is available for purchase in a market at a given time.

Buyers

People or organizations that acquire products or services within a marketplace.

Price

The price one must pay to secure a product or service.