An investment project requires a net investment of $100,000.The project is expected to generate annual net cash inflows of $28,000 for the next 5 years.The firm's cost of capital is 12 percent.Determine the internal rate of return for the project (to the nearest tenth of one percent).
A)12.0%
B)12.6%
C)3.6%
D)12.4%

Question

Quizplus · Accepted Answer

$100,000/$28,000 = 3.571
From Table IV, PVIFAᵣ,₅ = 3.571, which falls between 3.605 (12%) and 3.517 (13%).
r = 12.38% (calculator) or 12.4% (rounded)

An Investment Project Requires a Net Investment of $100,000