A firm seeks an internal rate of return of at least 9%. Would it make sense for the firm to spend $10,000 today on a piece of equipment that will allow it to bring in $5,600 of additional revenue in each of the next two years?

Question

Quizplus · Accepted Answer

To determine if the investment makes sense, we calculate the internal rate of return (IRR). The cash flows are -$10,000 initially, followed by $5,600 in each of the next two years. Using the IRR formula or a financial calculator, we find that the IRR is less than 9%, making option C correct.

A Firm Seeks an Internal Rate of Return of at Least