Suppose your firm is considering investing in a project that requires an initial investment of $500,000 at Year 0, and returns cash flows at the end of Years 1 to 5 of $20,000, $40,000, $60,000, $80,000 and $350,000, respectively. Further, assume your company’s cost of capital is 8%. What is the internal rate of return of the project (round your IRR to the nearest tenth of a percent, e.g., 10.1%)?

Q: Suppose your firm is considering investing in a project that requires an initial investment of $500,000 at Year 0, and returns cash flows at the end of Years 1 to 5 of $20,000, $40,000, $60,000, $80,000 and $350,000, respectively. Further, assume your company’s cost of capital is 8%. What is the internal rate of return of the project (round your IRR to the nearest tenth of a percent, e.g., 10.1%)?

or

Q: Let’s say your company is thinking of funding a project that would yield cash flows of $20,000, $40,000, $60,000, $80,000, and $350,000 at the end of Years 1 through 5, with an initial investment of $500,000 in Year 0. Additionally, suppose that the cost of capital for your business is 8%. How much is the project’s internal rate of return? Round it to the closest tenth of a percent, for example, 10.1%.

• None of these are true
• 9.4%
• 0.0%
• 7.9%
• 2.3%

Explanation: The Internal Rate of Return (IRR) of the project, rounded to the nearest tenth of a percent, is 9.4%.