Question

A project with an initial cost of $51,400 is expected to generate annual cash flows of $16,910 for the next 5 years. What is the project's internal rate of return

Answer 1

19.27%

Step-by-step explanation:

Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested

IRR can be calculated with a financial calculator

Cash flow in year 0 = $-51,400

Cash flow each year from year 1 to 5 = $16,910

IRR = 19.27%

To find the IRR using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.