Toy Town is considering a new toy with initial costs of $35,900.This toy is expected to produce cash flows of $52,500 in Year 1,$11,300 in Year 2,and nothing thereafter.The discount rate assigned to the toy is 18.7 percent.What is the IRR?
A)65.28%
B)24.79%
C)38.03%
D)56.65%
E)20.04%

Question

Quizplus · Accepted Answer

NPV = $0 = -$35,900 + $52,500 / (1 + IRR)+ $11,300 / (1 + IRR)² IRR = 65.28%

Toy Town Is Considering a New Toy with Initial Costs