Hunter Valley Horticulture Company provides flowers and other nursery products for decorative purposes in medium to large 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 total $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 all cash flows from a particular project equal to zero. Using the given figures, the IRR for the investment in the new van (with an initial outlay of $62,755 and annual cash inflows of $13,750 over seven years) is closest to 12%. This is determined through financial analysis or using financial calculators or software designed to calculate IRR based on these inputs.

Hunter Valley Horticulture Company Provides Flowers and Other Nursery Products