Assume That an Initial Investment Is $100,000 and That the Estimated

question 61

Multiple Choice

Assume that an initial investment is $100,000 and that the estimated annual cash flows for the next 5 years are $25,000. What is the internal rate of return (IRR) for this investment?

• A) 5.56%
• B) 18%
• C) 1%
• D) 8%

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Definitions:

Noncash Investing

A financial activity that involves acquiring or disposing of assets without the immediate use of cash, such as through trading one asset for another or completing transactions through financing arrangements.

Fixed Assets

Long-term assets purchased for operating the business, not expected to be converted to cash within a year.

Investing Activities

Deals that include buying and selling assets with long-term value and investments outside of cash equivalents.

Operating Activities

Business actions related directly to the production and delivery of goods and services, reflected in the cash flow statement.