What Is the IRR of a Project That Requires an Initial

question 133

Multiple Choice

What is the IRR of a project that requires an initial cash outlay of $12,345 and is expected to generate cash flows of $3,600 a year for three years and then $4,200 a year for two more years? Assume the tax rate is zero.

• A) 14.00%
• B) 15.50%
• C) 16.20%
• D) 17.80%

---

Definitions:

Direct Labor Cost

The expenses associated with paying the wages of workers directly involved in manufacturing goods or providing services.

Budgeted Sales

The projected amount of sales, in units or dollars, that a company expects to achieve during a specific period.

Credit Sales

Sales in which the customer is allowed to pay for the goods or services at a later date, rather than at the time of purchase.

Raw Materials Purchases

The total cost of all components bought for use in the production process of goods.