What is the IRR of an investment that costs $77,500 and pays $27,500 a year for four years?
A) 16%
B) 18%
C) 20%
D) 22%
E) 24%

Question

Quizplus · Accepted Answer

IRR is the discount rate that makes the NPV of a project equal to zero. In this case, the NPV is:-77,500 + 27,500/(1+IRR)^1 + 27,500/(1+IRR)^2 + 27,500/(1+IRR)^3 + 27,500/(1+IRR)^4 = 0Solving for IRR using a financial calculator or spreadsheet, we get IRR = 16%.

What Is the IRR of an Investment That Costs $77,500