A project manager is using the internal rate of return method to make the final decision on which project to undertake.Which of these four projects has the highest internal rate of return?
A)$25,000 initial outlay with $10,000 cash inflows during the following five years
B)$12,500 initial outlay with $10,000 cash inflows during the following five years
C)$25,000 initial outlay with $5,000 cash inflows during the following five years
D)$12,500 initial outlay with $5,000 cash inflows during the following five years

Question

Quizplus · Accepted Answer

Project B has the highest internal rate of return (IRR) because it requires the lowest initial investment ($12,500) while generating the same annual cash inflows ($10,000) as project A for five years, leading to a quicker and higher return on investment compared to the other options.

A Project Manager Is Using the Internal Rate of Return