VCV Limited is planning a capital investment. Using a discount rate of 11%, the company has determined that its proposed investment project has a negative net present value of - £13,675. Using a discount rate of 9%, the company has determined that its proposed investment project will have a positive net present value of £17,530. Given the above net present value calculations, what is the internal rate of return of the proposed investment project to two decimal places?

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate at which the net present value (NPV) of a project is zero. Since the NPV is negative at 11% and positive at 9%, the IRR must be between these two rates. The closest option to this range is 10.12%.

VCV Limited Is Planning a Capital Investment