Answer:
The correct answer is 12%
Explanation:
The internal rate of return is a metric used to estimate the profitability of potential investments. The internal rate of return is a discount rate that makes the net present value of all cash flows from a particular project equal to zero.
Formula and Calculation for IRR
\begin{aligned} &\text{IRR}=\text{NPV}=\sum_{t=1}^{T}\frac{C_t}{\left(1+r\right)^t}-C_0=0\\ &\textbf{where:}\\ &C_t=\text{Net cash inflow during the period t}\\ &C_0=\text{Total initial investment costs}\\ &r=\text{The discount rate}\\ &t=\text{The number of time periods}\\ \end{aligned}
IRR
where:
C t =Net cash inflow during the period t
C 0 =Total initial investment costs
r=The discount rate
t=The number of time periods
