A particular investment requires an initial cash outflow of $110,000. The investment is expected to produce net cash flows of $20,000, $25,000, $30,000, $38,000, and $50,000 in years
One, two, three, four, and five, respectively. To the nearest tenth of a percent, the internal rate
Of return on this investment is
A)67.5%.
B)48.2%.
C)12.5%.
D)No IRR exists for these cash flows.

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. The IRR for these cash flows is 12.5%, which can be found using financial calculators or software designed for financial analysis by inputting the initial outflow and the subsequent inflows.

A Particular Investment Requires an Initial Cash Outflow of $110,000