The Sisyphean Company is planning on investing in a new project. This will involve the purchase of some new machinery costing $400,000. The Sisyphean Company expects cash inflows from this project as detailed below: The appropriate discount rate for this project is 15%. The internal rate of return (IRR)for this project is closest to ________.
A)13%
B)16%
C)21%
D)24%

Question

The Sisyphean Company is planning on investing in a new project. This will involve the purchase of some new machinery costing $400,000. The Sisyphean Company expects cash inflows from this project as detailed below:  The appropriate discount rate for this project is 15%. The internal rate of return (IRR)for this project is closest to ________.
A)13% 
B)16% 
C)21% 
D)24%

Quizplus · Accepted Answer

To find the IRR, we need to find the discount rate at which the present value of cash inflows equals the initial cost of the machinery, which is $400,000. Using the NPV formula and trial and error, we can find that an approximate IRR of 21% makes the net present value of the project equal to zero. Therefore, the closest choice is C.

The Sisyphean Company Is Planning on Investing in a New