What Is the Internal Rate of Return for a Project

question 124

Multiple Choice

What is the internal rate of return for a project that requires an initial investment of $76,000 and then generates cash flows of $20,507 per year for 7 years?

• A)16%
• B)17%
• C)18.2%
• D)19%

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Definitions:

Payback Period

The time it takes for an investment to generate an amount of income or cash flow to recover the cost of the investment, indicating the investment's risk and liquidity.

Annual Cash Inflows

The total amount of money received by a company or individual in a year from various sources, excluding borrowings.

Straight-Line Depreciation

A way to distribute the outlay of a tangible resource over its service life in regular annual contributions.

Tax Rate

The percentage at which an individual or corporation is taxed on their income or profits.