Strange Manufacturing Company is purchasing a production facility at a cost of $21 million. The company expects the project to generate annual cash flows of $7 million over the next five years. Its cost of capital is 18 percent. Internal rate of return: What is the internal rate of return on this project? (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 found to be approximately 20%.

Strange Manufacturing Company Is Purchasing a Production Facility at a Cost