The First Trial of an IRR Interpolation Used an Interest

question 10

Multiple Choice

The first trial of an IRR interpolation used an interest rate of 15% and produced a NPV of ($81,450) and the second trial of IRR at 6% produced an NPV of $56,000. Assuming a straight-line relationship between IRR and NPV, what percent reduction from 15% would result in the project's IRR?

• A) 5.3%
• B) 11.1%
• C) 9.8%
• D) 7.6%
• E) 13.1%

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Definitions:

Losses

The reduction in financial resources due to business operations or other activities exceeding the income generated, often reflected in the income statement.

Investment

The allocation of resources, usually money, in something to earn income or profit.

Associate

A company in which another company owns a significant stake, typically between 20% and 50%, allowing some degree of influence without full control.