Quick Sale Real Estate Company is planning to invest in a new development. The cost of the project will be $23 million and is expected to generate cash flows of $14,000,000, $11,750,000, and $6,350,000 over the next three years. The company's cost of capital is 20 percent. What is the internal rate of return on this project? (Do not round intermediate computations. Round final answer 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 all cash flows from a particular project equal to zero. In this case, the IRR exceeds the company's cost of capital (20%), indicating the project is expected to generate a return higher than the cost of financing it. The IRR can be found using financial calculators or software by inputting the cash flows and solving for the rate that sets the NPV to zero. Given the choices, 22% is the closest estimate to the IRR for this project, considering the provided cash flows and initial investment.

Quick Sale Real Estate Company Is Planning to Invest in a New