$$\begin{array}{l}
\text { What is the internal rate of return on an investment with the following cash flows? }\
\begin{array} { | l | l | }
\hline \text { Year } & \text { Cash Flow } \
\hline 0 & - £ 123,400 \
\hline 1 & £ 36,200 \
\hline 2 & £ 54,800 \
\hline 3 & £ 48,100 \
\hline
\end{array}
\end{array}$$
A)5.93%
B)5.96%
C)6.04%
D)6.09%
E)6.13%

Question

$$\begin{array}{l}
\text { What is the internal rate of return on an investment with the following cash flows? }\
\begin{array} { | l | l | } 
\hline \text { Year } & \text { Cash Flow } \
\hline 0 & - £ 123,400 \
\hline 1 & £ 36,200 \
\hline 2 & £ 54,800 \
\hline 3 & £ 48,100 \
\hline
\end{array}
\end{array}$$
A)5.93%
B)5.96%
C)6.04%
D)6.09%
E)6.13%

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. It can be found using financial calculators, spreadsheet software like Excel, or iterative methods because it involves solving for the root of a polynomial equation, which cannot be done analytically in this case. The correct IRR for the given cash flows is approximately 5.96%, which is found by inputting the cash flows into an IRR calculation tool or function.

A)593% B)5

A)593%
B)5