The following data pertain to an investment proposal: $\begin{array}{lr}
\text { Required equipment investment } & \$ 120,200 \
\text { Annual cost savings } & \$ 31,700 \
\text { Projected life of investment } & 5 \text { years } \
\text { Projected salvage value } & \$ 0\
\text { Required rate of return }&9\%
\end{array}$ The income tax rate is 30%. To which amount is the internal rate of return on this investment closest?

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of the cash flows from the investment equal to zero. Given the annual cost savings and the initial investment, the IRR is closest to 10.0%.

The Following Data Pertain to an Investment Proposal The Income Tax Rate Is 30