Use the following table for questions .
-A company has a minimum required rate of return of 8% and is considering investing in a project that costs $67,145 and is expected to generate cash inflows of $27,000 each year for three years.The approximate internal rate of return on this project is

Question

Use the following table for questions . 
-A company has a minimum required rate of return of 8% and is considering investing in a project that costs $67,145 and is expected to generate cash inflows of $27,000 each year for three years.The approximate internal rate of return on this project is

Quizplus · Accepted Answer

To calculate the internal rate of return, we need to find the discount rate that makes the net present value of the cash inflows equal to the initial cost. Using a financial calculator or an Excel spreadsheet, we find that the internal rate of return is approximately 10.38%, which is greater than the minimum required rate of return of 8%. Therefore, this project is expected to generate a return greater than the minimum required rate of return and is a good investment. The closest answer choice is option B, which is 10%.

Use the Following Table for Questions