Question

You are offered a chance to buy an asset for $4,500 that is expected to produce cash flows of $750 at the end of Year 1, $1,000 at the end of Year 2, $850 at the end of Year 3, and $6,250 at the end of Year 4. What rate of return would you earn if you bought this asset?

a. 22.64%
b. 20.60%
c. 23.77%
d. 26.72%
e. 17.21%

Answer 1

A

Step-by-step explanation:

In this case the rate that allows you to bring annual disbursements to a single value is the IRR (internal return), in this case 22.64%