You have an investment opportunity that will cost you $10,000 today,but return $12,500 to you in one year.The IRR of this investment opportunity is closest to:
A)80%.
B)125%.
C)20%.
D)25%.

Question

Quizplus · Accepted Answer

The IRR (Internal Rate of Return) is the rate at which the net present value of an investment is zero. Here, the investment grows from $10,000 to $12,500 in one year, which is a $2,500 gain. The IRR is calculated as ($12,500 - $10,000) / $10,000 = 0.25 or 25%.

You Have an Investment Opportunity That Will Cost You $10,000