Muscle Company is investing in a giant crane. It is expected to cost 6.5 million in initial investment and it is expected to generate an end of year cash flow of 3.0 million each year for three years. Calculate the IRR approximately.
A) 14.6 %
B) 16.4 %
C) 18.2 %
D) 22.1%

Question

Quizplus · Accepted Answer

The IRR is the discount rate that makes the net present value (NPV) of the cash flows equal to zero. By trial and error or using financial calculators, the IRR for these cash flows is approximately 18.2%.

Muscle Company Is Investing in a Giant Crane