Question

Chronic Pain Clinic has estimated the following cash flows associated with a new project. The project cost of capital (discount rate) is 10 percent. Year Expected Net Cash Flow 0 ($800,000) 1 400,000 2 400,000 3 400,000 What is the project’s IRR? A. 18.5 percent B. 19.9 percent C. 20.4 percent D. 21.8 percent E. 23.4 percent

Answer 1

E. 23.4 percent

Step-by-step explanation:

The computation of the internal rate of return is shown below

Given that

The project cost of capital is 10%

And, the year and net cash flow is

Year Expected Net Cash Flow

0 ($800,000)

1 400,000

2 400,000

3 400,000

Now we apply the following formula

= IRR()

So the internal rate of return is 23.38% i.e. 23.4%