Cantar,Inc.has the opportunity to invest in new equipment that will cost $113,000.The net cash inflows for 10 years equal $20,000 per year.What is the internal rate of return for the investment? A partial table of the present value of an annuity of $1 in arrears is as follows: $\begin{array}{|c|r|r|r|r|r|r|r|r|}
\hline \text { Year } & 2 \% & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% & 16 \% \
\hline 10 & 7.983 & 8.111 & 7.360 & 6.710 & 6.145 & 5.650 & 5.216 & 4.833 \
\hline
\end{array}$

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 equal to zero. The present value factor for the cash inflows is $113,000 / $20,000 = 5.65. From the table, this corresponds to an IRR of 12%.

Cantar,Inc A)8% B)10% C)12% D)14

Cantar,Inc A)8%
B)10%
C)12%
D)14