What Is the Internal Rate of Return (IRR)of an Investment

question 89

Multiple Choice

What is the internal rate of return (IRR) of an investment that requires an initial investment of $10,000 today and pays $14,000 in one year's time?

• A)4%
• B)14%
• C)24%
• D)40%
• E)33%

---

Definitions:

NPV

Net Present Value, a method used in capital budgeting to assess the profitability of an investment or project, calculated by subtracting the present values of cash outflows from the present values of cash inflows over a period of time.

Break-Even Analysis

A calculation to determine the point at which revenue received equals the costs associated with receiving the revenue.

Capital Budgeting

The process of planning and managing a company's long-term investments in projects and assets.

What-If Questions

Hypothetical questions used to explore the effects of changes in variables or conditions, often used in planning and decision making.