Moepro,Inc.is considering a five-year project that has an initial outlay or cost of $120,000.The respective future cash inflows from its project for years 1,2,3,4 and 5 are: $55,000,$45,000,$35,000,$25,000,and $15,000.Moepro uses the internal rate of return method to evaluate projects.What is the project's IRR?
A)The IRR is less than 22.50%.
B)The IRR is about 19.16%.
C)The IRR is about 17.86%.
D)The IRR is over 25.50%.

Question

Quizplus · Accepted Answer

Using a financial calculator or Excel, we can find that the project's IRR is approximately 17.86%. This is the rate at which the net present value (NPV) of cash inflows equals the initial outlay of $120,000. Therefore, the correct answer is (C) The IRR is about 17.86%.