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DYI Construction Co. is considering a new inventory system that will cost $650,000. The system is expected to generate positive cash flows over the next four years in the amounts of $350,000 in year one, $325,000 in year two, $150,000 in year three, and $180,000 in year four. DYI's required rate of return is 9%. What is the internal rate of return of this project?
a) 11.57%
b) 15.13%
c) 10.87%
d) 23.85%

Respuesta :

Tundexi

Answer:

d. 23.84%

Explanation:

Years   Cash-flow

0           -650,000

1             350,000

2            325,000

3            150,000

4            180,000

Using MS Excel IRR function

Internal rate of return = IRR(Cashflow year 0, 1, 2, 3, 4)

Internal rate of return = 23.84%

So, the internal rate of return of this project is 23.84%.

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