The following data are available on a proposed investment project: $\begin{array} { l r }
\text { Initial Investment } & \$ 142,500 \
\text { Annual Cash Inflows } & \$ 30,000 \
\text { Life of the Investment. } & 8 \text { years } \
\text { Required Rate of Return } & 10 \%
\end{array}$ Which of the following statements best describes the internal rate of return on the proposed investment project? (Ignore income taxes in this problem.)

Question

The following data are available on a proposed investment project: $\begin{array} { l r } 
\text { Initial Investment } & \$ 142,500 \
\text { Annual Cash Inflows } & \$ 30,000 \
\text { Life of the Investment. } & 8 \text { years } \
\text { Required Rate of Return } & 10 \%
\end{array}$ Which of the following statements best describes the internal rate of return on the proposed investment project? (Ignore income taxes in this problem.)

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of the cash flows from the investment equal to zero. By calculating the IRR using the given cash inflows and initial investment, it is found to be between 13% and 14%.

The Following Data Are Available on a Proposed Investment Project