Suppose that an industrial building can be purchased today for $2,500,000. If it is expected to produce cash flows of $180,000 for each of the next five years (assume CFs are received at the end of each year) and can be sold at the end of the fifth year for $2,800,000, what is the internal rate of return (IRR) on this investment?
A) 0.09%
B) 4.57%
C) 9.20%
D) 10.37%

Question

Quizplus · Accepted Answer

The IRR is the discount rate that makes the net present value (NPV) of the cash flows equal to zero. By calculating the IRR using the given cash flows and sale price, it is approximately 9.20%.

Suppose That an Industrial Building Can Be Purchased Today for $2,500,000