Glades Thread Company is evaluating an investment that will cost $760,000 and will yield cash flows of $255,000 in the first year,$360,000 in the second year,and $380,000 in the third and the final year.Use the table below and determine the internal rate of return. Present value of $1:
$$\begin{array} { | c | c | c | c | c | c | }
\hline & 8 \% & 9 \% & 10 \% & 11 \% & 12 \% \
\hline 1 & 0.926 & 0.917 & 0.909 & 0.901 & 0.893 \
\hline 2 & 0.857 & 0.842 & 0.826 & 0.812 & 0.797 \
\hline 3 & 0.794 & 0.772 & 0.751 & 0.731 & 0.712 \
\hline 4 & 0.735 & 0.708 & 0.683 & 0.659 & 0.636 \
\hline 5 & 0.681 & 0.65 & 0.621 & 0.593 & 0.567 \
\hline
\end{array}$$ The IRR of the project will be ________.

Question

Glades Thread Company is evaluating an investment that will cost $760,000 and will yield cash flows of $255,000 in the first year,$360,000 in the second year,and $380,000 in the third and the final year.Use the table below and determine the internal rate of return. Present value of $1:
$$\begin{array} { | c | c | c | c | c | c | } 
\hline & 8 \% & 9 \% & 10 \% & 11 \% & 12 \% \
\hline 1 & 0.926 & 0.917 & 0.909 & 0.901 & 0.893 \
\hline 2 & 0.857 & 0.842 & 0.826 & 0.812 & 0.797 \
\hline 3 & 0.794 & 0.772 & 0.751 & 0.731 & 0.712 \
\hline 4 & 0.735 & 0.708 & 0.683 & 0.659 & 0.636 \
\hline 5 & 0.681 & 0.65 & 0.621 & 0.593 & 0.567 \
\hline
\end{array}$$ The IRR of the project will be ________.

Quizplus · Accepted Answer

The IRR is the rate that makes the NPV of cash flows equal to zero. By calculating the NPV at different rates, we find that the NPV is closest to zero between 10% and 11%.

Glades Thread Company Is Evaluating an Investment That Will Cost