Springtime Flower Company provides flowers and other nursery products for decorative purposes in medium to large sized restaurants and businesses. The company has been investigating the purchase of a new specially equipped van for deliveries. The van has a value of $62,755 with a seven-year life. The expected additional cash inflows are $13,750 per year. What is the internal rate of return?

Question

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 an investment equal to zero. By calculating the IRR for the given cash flows ($13,750 per year for 7 years) and initial investment ($62,755), the IRR is found to be approximately 12%.

Springtime Flower Company Provides Flowers and Other Nursery Products for Decorative