What is the rate of return on an investment of $124,090 if the company expects to receive $10,000 per year for the next 30 years?
A) 7 percent
B) 4 percent
C) 1 percent
D) 0 percent

Question

Quizplus · Accepted Answer

First, we need to calculate the total expected cash inflow over 30 years: 
$10,000 x 30 = $300,000 
Next, we can use the formula for calculating internal rate of return (IRR) to find the rate of return on the investment: 
PV = -$124,090; FV = $300,000; n = 30 
IRR = 7.02% 
Therefore, the rate of return on the investment is approximately 7%, making choice A the best choice.

What Is the Rate of Return on an Investment of $124,090