In using the internal rate of return method the internal rate of return factor was 5.0 and the equal annual cash inflows were $40000. The initial investment in the project must have been
A) $40000.
B) $8000.
C) $200000.
D) an amount which cannot be determined.

Question

Quizplus · Accepted Answer

The formula for calculating initial investment using the internal rate of return method is:

Initial Investment = (Equal Annual Cash Inflows) / Internal Rate of Return Factor

Plugging in the given values:

Initial Investment = $40,000 / 5.0 = $8,000

Therefore, the correct answer is B.

In Using the Internal Rate of Return Method the Internal