Future Value and IRR

[johnnylaurito]

2) What is the annual IRR required on a cash flow beginning with $5,000 annual deposits in the beginning of the year, lasting for 10 years, and resulting in a future value at the end of year 20 of $200,000?

 

[tkhunny]

Well, put it together. If P is the balanace at the beginning of some year, then in that year, it grows P*1.10 and is taxed on P*0.10 in the amount of P*0.30*0.10.

P + P*(0.10) - P*(0.30*0.10) = P(1 + 0.10 - 0.03) = P*(1.07)

Unless you want to calculate the tax directly, just use the untaxed rate!

 

[Denis]

2) What is the annual IRR required on a cash flow beginning with $5,000 annual deposits in the beginning of the year, lasting for 10 years, and resulting in a future value at the end of year 20 of $200,000?

Cannot be solved directly: iteration required (numerical solving).
Rate will be ~9.2%

If you want to "learn about it", here's lots of sites:
http://www.google.ca/#hl=en&source=hp&b ... fb28fe07a2