a bit of algebra-related help needed

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eMadman
bleh, I hate my finance class.

Anyways, i'm doing the problem sets for my finance class and I ended up being stuck here. I need to solve for R but I'm confused as to how to isolate the R to get the solution. My friend gave me an answer of 11.37% but not how she got to it. I normally wouldn't mind just dropping in the answer but my TA is picky about us showing our work and I need the grade. Because of that, I need the method (even a basic one) through which I can solve for R.


ProbSet_3--Q5A.jpg

btw, that's not my handwriting in the scan ;)

Assume NPV = 0

gah, even with my tiny handwriting, the final solution for this one question alone is 2 pages long. Thankfully the 4 parts to this question aren't too inter-dependant
 
1) Find a common denominator and make it one bigass fraction. => (1+r)^10.
2) Multiply both sides by the common denominator.
3) Factor out a (1+r)^4 from the right and then divide both sides by that. (multiply the 68,200 by (1+r)^4 to keep the same equation)
4) Multiply out all of the exponentials. Leave the left NPV(expanded exponential)
5) Add the common terms and simplify.
6) Factor the right side. (if possible, I don't know, I stopped working it before 4).

I'm not sure where to go from there, that might solve it for you, but it is definately towards the direction you need to be heading. I absolutely hate problems like that because they take so effing long to figure out. Best of luck and if you get stuck anywhere just scan it in and I'll do what I can to help you out.
 
ugh, and now the headache sets in. Too much thinking for me to do at 12:30am... i might skip this part and do it before class tomorrow

I've brought it down to here:
-191000= [-556000(1+r)^10 + 179800(1+r)^9 + 136400(1+r)^8 + 105400(1+r)^7 + 93000(1+r)^6 + 80600(1+r)^5 +68200(1+r)^4]

how do i take it further now?

btw, is it supposed to be -191000 and -556000 from moving the stuff around?
 
::shrug:::lol: I'm not really sure man.
 
I dropped the numbers into excel and it's giving me a solution of 7.05%. For some reason I don't think that it's right :indiff:... not that it matters considering that I can't use excel.

To arrive at the 7.05% I used the goal seek function. I set the formula of B9 to sum(b1:b8). Then for the Goal Seek parameters I used the following:
Set Cell: B9
To Value: 0
by changing Cell: A1 (where A1 = r)

excel.jpg
 
Well.. after messing around with it.. The answer, IS, 11.37 percent. (If you plug in 11.37 for R, you get 556 018.8276, which is quite accurate considering the scale of this problem. I'm still working on how to solve it though. *frown*
 
thanks for the help folks... but i just found out that they were expecting us to use our financial calculators to get the IRR value. Damn I hate it when the profs take so long to respond on the msg boards :irked:

it's funny how you can bring roughly 1 or 2 hours of math by hand down to a minute of entering numbers and like 2 seconds of processing using a calculator (yes, the thing actually chugged for that long)
 
halfracedrift
:lol: So I take it that you have the answer now?
Click to expand...
well... i had the 11.37% answer from the beginning... i just needed to show my work. Apparently though the only way that's reasonably possible is to punch the numbers into the financial calculator and let it do the number crunching. We didn't find that out till this morning (we didn't even know the calculator was capable of doing it)... so we got to have some major headaches trying to do it by hand.
 
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