Given the following annual net cash flows, determine the IRR to the nearest whole percent of a project with an initial outlay of $1,800. Year Net Cash Flow
1 $1,000
2 $750
3 $500
A) 14%
B) 12%
C) 8%
D) 25%

Question

Quizplus · Accepted Answer

Using a financial calculator or Excel function, the IRR is approximately 14%. This is the discount rate that makes the net present value (NPV) of the cash flows equal to the initial outlay of $1,800. At an IRR of 14%, the NPV is approximately zero. Therefore, choice A is the best option.

Given the Following Annual Net Cash Flows, Determine the IRR