Asked by
Mallory Smith
on Dec 09, 2024
Verified
A 25- year project has a cost of $1,500,000 and has annual cash flows of $400,000 in years 1-15, and $200,000 in years 16-25. The company's required rate is 14%. Given this information, calculate the IRR of the project.
A) 30.25%
B) 28.28%
C) 26.22%
D) 24.25%
E) 22.25%
IRR
Internal Rate of Return, a financial metric used to estimate the profitability of potential investments by calculating the interest rate at which the net present value of all cash flows (both positive and negative) from a particular project equals zero.
Required Rate
The minimum return needed from an investment to compensate for its risk.
Annual Cash Flows
The total amount of cash that a company receives and spends within one year.
- Gain insight into the theory and computation of the Internal Rate of Return (IRR) for distinct projects.
Verified Answer
EK
Learning Objectives
- Gain insight into the theory and computation of the Internal Rate of Return (IRR) for distinct projects.