Finch Corporation purchased an asset costing $10 000.Annual operating cash inflows generated from the asset are expected to be $1610 each year for eight years.No salvage value is expected at the end of the asset's life.Using time value of money tables,which of the following rates is closest to the internal rate of return on the project?

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of cash flows from a project equal to zero. Using the present value of annuity formula, the IRR can be found by matching the present value factor to the cash inflows. For $1610 over 8 years to equal $10,000, the rate closest to this is 6%.

Finch Corporation Purchased an Asset Costing $10 000