Which of the following statements is most likely correct for a project costing $50,000 and returning $14,000 per year for five years?
A)NPV = $3,071.01
B)NPV = $20,000
C)IRR = 2.8 percent
D)IRR is greater than 10 percent

Question

Quizplus · Accepted Answer

The IRR (Internal Rate of Return) is the discount rate that makes the NPV (Net Present Value) of cash flows from a project equal to zero. Given the cash flows, the IRR is likely to be greater than 10 percent, as the project returns $14,000 annually for five years, which is a significant return relative to the initial investment of $50,000.

Which of the Following Statements Is Most Likely Correct for a Project