Internal rate of return: Clydesdale Bank is setting up a brand new branch. The cost of the project will be $1.2 million. The branch will create additional cash flows of $235,000, $412,300, $665,000 and $875,000 over the next four years. The company's cost of capital is 12 percent. What is the internal rate of return on this branch expansion? (Round to the nearest percent.)

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. By calculating the IRR for the given cash flows, it is approximately 23%.

Internal Rate of Return: Clydesdale Bank Is Setting Up a Brand