Your company is considering a project with the following cash flows: Initial outlay = $1748.80
Cash flows in years 1-6 = $500
Calculate the IRR on the project.
A)9%
B)11%
C)18%
D)24%

Question

Quizplus · Accepted Answer

Using the formula for calculating IRR, we get:
1748.80 = (500/1+r) + (500/1+r)^2 + (500/1+r)^3 + (500/1+r)^4 + (500/1+r)^5 + (500/1+r)^6
Simplifying and solving for r, we get r=18%. Therefore, the IRR on the project is 18%. This is the best choice as it is the only option provided that is a possible answer for the IRR calculation.

Your Company Is Considering a Project with the Following Cash