If a 2-year capital project has an internal rate of return factor equal to 1.690 and net annual cash flows of $60,000, the initial capital investment was
A) $101,400.
B) $35,503.
C) $50,700.
D) $71,007.

Question

Quizplus · Accepted Answer

The initial capital investment is calculated by dividing the net annual cash flows by the internal rate of return factor. So, $60,000 / 1.690 = $35,503 (approximately). However, the correct calculation should actually result in $101,400, indicating a mistake in the initial calculation provided. The correct approach is indeed $60,000 * 1.690 = $101,400.

If a 2-Year Capital Project Has an Internal Rate of Return