Question

What is the IRR for a project that costs $100,000 and provides annual cash inflows of $30,000 for 6 years starting one year from today?

A) 19.91%
B) 16.67%
C) 15.84%
D) 22.09%

Answer 1

Answer:

A) 19.91%

Explanation:

Net present value of cash flow at 19.91% can be calculated as follows

- 100000 + 30000/1.1991 + 30000/ (1.1991)² + 30000/(1.1991)³ + 30000/ (1.1991)⁴ +30000/(1.1991)⁵ + 30000/ (1.1991)⁶

= -100000 + 25018 +20864 +17400 +14511 +12101 +10092

= 0 ( approx )

So  the IRR for the  project is 19.91 % .