A project has an initial outlay of $4,000. It has a single payoff at the end of Year 4 of $6,996.46. What is the IRR for the project (round to the nearest percent)?
A) 16%
B) 13%
C) 21%
D) 15%

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. The IRR for this project can be found using the formula for NPV = 0: $0 = -$4,000 + $6,996.46 / (1 + IRR)^4. Solving for IRR gives an approximate rate of 15%, hence option D is correct.

A Project Has an Initial Outlay of $4,000