A project will cost $100,000 and is expected to produce a single cash flow of $118,000 at the end of one year. To the nearest tenth of a percent, the IRR of this project is
A)18.0%.
B)11.8%.
C)8.5%.
D)none of the above.

Question

Quizplus · Accepted Answer

The IRR is calculated as the rate of return that makes the net present value (NPV) of all cash flows from a particular project equal to zero. In this case, the formula for IRR based on the given cash flows is: $0 = -$100,000 + $118,000 / (1 + IRR), solving for IRR gives an IRR of 18.0%.

A Project Will Cost $100,000 and Is Expected to Produce