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Determine the original investment for the following related subsequent cash flows if the internal rate of return (IRR) is 12%. A : $17,438.62 B : $19,975.40 C : $22,767.86 D : $21,875.00
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12 votes
12 votes
Determine the original investment for the following related subsequent cash flows if the internal rate of return (IRR) is 12%.

A :
$17,438.62

B :
$19,975.40

C :
$22,767.86

D :
$21,875.00

User Shreesha N
by
3.5k points

1 Answer

9 votes
9 votes

Answer:

B : $19,975.40

Explanation:

The computation of the original investment is shown below:

Year Cash flows Discount rate at 12% Present value

1 $10,000 0.8926 $8,928.57

2 $8,500 0.79719 $6,776.15

3 $6,000 0.71178 $4,270.68

Total present value $19,975.40

In the case of IRR, the total of present value would be equivalent to the orginal investment

User LikeMaBell
by
2.7k points
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