If a Project's IRR is 13 percent and the project provides annual cash flows of $15,000 for four years, how much did the project cost?
A)$44,617
B)$52,200
C)$60,000
D)$72,747

Question

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. Given the IRR of 13% and annual cash flows of $15,000 for four years, we can calculate the initial cost of the project by discounting these cash flows back at the IRR. Using the formula for the present value of an annuity: PV = PMT × [(1 - (1 + r)^-n) / r], where PMT is the annual cash flow, r is the discount rate (IRR in this case), and n is the number of periods, we find that the initial cost (or present value of these cash flows) is closest to $44,617.

If a Project's IRR Is 13 Percent and the Project