Suppose a company has an investment that requires an after-tax incremental cash outlay of $12,000 today.It estimates that the expected future after-tax cash flows associated with this investment are $5,000 in years 1 and 2, and $8,000 in year 3.What is the approximate IRR?

Question

Quizplus · Accepted Answer

To calculate the IRR, we need to find the discount rate that equates the present value of the expected future cash flows to the initial cash outlay. By using trial and error or a financial calculator, we find that a discount rate of approximately 21% would make the present value of the expected future cash flows equal to $12,000. Therefore, the IRR of this investment is approximately 21%.

Suppose a Company Has an Investment That Requires an After-Tax