Francisco d'Anconia is considering an investment opportunity that costs $10,000 today and will pay $11,500 in two years.The IRR of this opportunity is closest to:
A)7.24%.
B)7.50%.
C)10.00%.
D)15.00%.

Question

Quizplus · Accepted Answer

The IRR (Internal Rate of Return) is the discount rate that makes the net present value (NPV) of the cash flows from an investment equal to zero. For this investment, solving the equation $10,000 = $11,500 / (1 + IRR)^2$ gives an IRR closest to 7.24%.

Francisco D'Anconia Is Considering an Investment Opportunity That Costs $10,000