Question

Flynn, Inc. is considering a four- year project that has an initial outlay or cost of $80,000. The future cash inflows from its project are $40,000, $40,000, $30,000, and $30,000 for years 1, 2, 3 and 4, respectively. Flynn uses the internal rate of return method to evaluate projects. What is the approximate IRR for this project?

Answer 1

Answer:

The IRR for this project is 28.88%

Explanation:

The Internal Rate of Return (IRR) is that rate of return in which the Net present value (NPV) of the project is zero.

Where, Net Present value is that value in which the initial investment and cash outflows after applying discount factor is equal.

The Internal rate of return is calculated by using the Excel formula:

= IRR (-initial investment, all cash outflows)

The computation is shown in the attachment sheet.

Thus, the IRR for this project is 28.88%