(Ignore income taxes in this problem. )Overland Corporation has gathered the following data on a proposed investment project: The company uses straight-line depreciation on all equipment.Assume cash flows occur uniformly throughout a year except for the initial investment. The internal rate of return on the investment is closest to:

Question

(Ignore income taxes in this problem. )Overland Corporation has gathered the following data on a proposed investment project:  The company uses straight-line depreciation on all equipment.Assume cash flows occur uniformly throughout a year except for the initial investment. The internal rate of return on the investment is closest to:

Quizplus · Accepted Answer

Factor of the internal rate of return = Investment required ÷ Annual net cash inflow
= $150, 000 ÷ $40, 000 = 3.75
This is closest to the present value of an annuity over 10 years at 23%.Therefore the internal rate of return is closest to 23%.

(Ignore Income Taxes in This Problem