Use the information for the question(s)below.
The Sisyphean Company is planning on investing in a new project.This will involve the purchase of some new machinery costing $450,000.The Sisyphean Company expects cash inflows from this project as detailed below:
The appropriate discount rate for this project is 16%.
-The internal rate of return (IRR)for this project is closest to:
A)18.9%
B)22.7%
C)34.1%
D)39.1%
E)42.3%

Question

Use the information for the question(s)below.
The Sisyphean Company is planning on investing in a new project.This will involve the purchase of some new machinery costing $450,000.The Sisyphean Company expects cash inflows from this project as detailed below:
  The appropriate discount rate for this project is 16%.
-The internal rate of return (IRR)for this project is closest to:
A)18.9% 
B)22.7% 
C)34.1% 
D)39.1% 
E)42.3%

Quizplus · Accepted Answer

Calculating the NPV of the cash inflows using the discount rate of 16% gives an NPV of $77,004. To find the IRR, we need to find the discount rate that gives an NPV of zero. Using trial and error, we find that the IRR is approximately 34.1%. Therefore, the best choice is C.

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