To calculate the internal rate of return on a factory that would yield a perpetual future stream of income,one would divide
A) the annual future payment by the cost of the factory.
B) the sum of the future payments by the cost of the factory.
C) the cost of the factory by the rate of interest.
D) the cost of the factory by the annual future payment.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) for a perpetual stream of income is calculated by dividing the annual future payment by the cost of the factory, which gives the rate at which the present value of the future income stream equals the cost of the investment.

To Calculate the Internal Rate of Return on a Factory