What is the Internal Rate of Return (IRR) for the cash flows provided in the table below?
Note: The negative cash flow for year 0 is the initial investment for the project. The required rate of return is 8%.
Year Cash Flow
0 -$100,000
1 $45,000
2 $45,000
3 $45,000
A) 8.00%
B) 9.70%
C) 12.41%
D) 16.65%
D
Explanation: D) Via Calculator: N = 3, PV = -100,000, PMT = 45,000, FV = 0, Solve for r = IRR = 16.65%.
Business
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