An investment is expected to generate net operating cash inflows of $25,000 per year for each of the next 5 years. If the initial amount invested is $101,000, which of the following is closest to the internal rate of return?

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 an investment equal to zero. By trial and error or using financial calculators, the IRR for these cash flows is closest to 7.5%.

An Investment Is Expected to Generate Net Operating Cash Inflows