(Appendix 13A)The following data pertain to an investment proposal:
The internal rate of return on this investment proposal is closest to which of the following? (Ignore income taxes in this problem. )
A) 6.7%.
B) 7.3%.
C) 8.7%.
D) 9.3%.

Question

(Appendix 13A)The following data pertain to an investment proposal: 
The internal rate of return on this investment proposal is closest to which of the following? (Ignore income taxes in this problem. )
A) 6.7%. 
B) 7.3%. 
C) 8.7%. 
D) 9.3%.

Quizplus · Accepted Answer

To find the internal rate of return (IRR), we need to solve for the discount rate that makes the net present value (NPV) of the project equal to zero. Using a financial calculator or spreadsheet program, we can input the cash flows for each year and solve for the IRR. In this case, the IRR is approximately 8.7%, which is closest to choice C.

(Appendix 13A)The Following Data Pertain to an Investment Proposal