Question

You are analyzing an investment opportunity for your firm. The investment will cost $10,000 to undertake and will produce a cashflow of $2000 at the end of every year for the next 6 years. What is the internal rate of return?
Select one:
a. About 4%
b. About 4.5%
c. About 5%
d. About 5.5%
e. None of the above.

Answer 1

Solution :

The Internal Rate of Return of the investment opportunity is = 5.4718 %

= 5.5 % ( when rounded off to one decimal place )

Thus the Internal Rate of Return is = 5.5 %

The solution is option d. about 5.5 %

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.