Perez Co. is considering an investment of $27,336 that provides net cash flows of $9,000 annually for
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Perez Co. is considering an investment of $27,336 that provides net cash flows of $9,000 annually for four years.
(a) What is the internal rate of return of this investment?
(b) The hurdle rate is 10%. Should the company invest in this project on the basis of internal rate of return?
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a The internal rate of return IRR of this investment is 144 To calcu...View the full answer
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Internal rate of return is a method of calculating an investment’s rate of return. The term internal refers to the fact that the calculation excludes external factors, such as the risk-free rate, inflation, the cost of capital, or financial risk.
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