Use the following table, A company has a minimum required rate of return of 8% and is considering investing in a project that costs $68,337 and is expected to generate cash inflows of $27,000 each year for three years. The approximate internal rate of return on this project is
A) 8%.
B) 9%.
C) 10%.
D) less than the required 8%.

Question

Use the following table,  A company has a minimum required rate of return of 8% and is considering investing in a project that costs $68,337 and is expected to generate cash inflows of $27,000 each year for three years. The approximate internal rate of return on this project is
A) 8%. 
B) 9%. 
C) 10%. 
D) less than the required 8%.

Quizplus · Accepted Answer

Using the present value formula and trial and error, we find that the internal rate of return is approximately 9%. This is greater than the minimum required rate of return of 8%, making the project a good investment.

Use the Following Table, a Company Has a Minimum