Question

The internal rate of return represents the rate of interest that recovers the initial investment outlay....

The internal rate of return represents the rate of interest that recovers the initial investment outlay. Discuss the validity of this statement.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1


The statement is valid.


Explanation - The internal rate of return is the rate of return at which NPV is equal to zero. Hence, at this rate, initial investment outlay is recovered, provided all the incoming cash flows are reinvested at the Internal rate of return. IRR is the discount rate at which NPV is zero. NPV is zero when the present value of cash inflows equals the initial investment. Therefore, IRR represents the rate of interest that recovers the initial investment outlay on a discounted cash flow basis.

PLS UPVOTE MY ANSWER

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What is the internal rate of return for the following: (A) an initial outlay of $11,000...
What is the internal rate of return for the following: (A) an initial outlay of $11,000 resulting in a single cash inflow of $25,648 in 11 years. (B) an initial outlay of $9500 resulting in a cash inflow of $1912 at the end of each year for the next 8 years. (C) an initial outlay of $10,500 resulting in a cash inflow of $1800 at the end of year 1, $4900 at the end of your 2 and $8400 at...
Calculate the internal rate of return of a project which requires an initial outlay of 18000...
Calculate the internal rate of return of a project which requires an initial outlay of 18000 and produces a return of 7000 at the end of year 1 and 14000 at the end of year 2.
What is the internal rates of return (IRR) for the project that has an initial outlay...
What is the internal rates of return (IRR) for the project that has an initial outlay of $100 and a single cash inflow of $180 in 6 years? Please round to FOUR(4) decimals in numbers, not the percentage. For instance, if the IRR is 5.31%, you put in 0.0531 in the answer.
What is the internal rate of return on an investment that has an initial cost of...
What is the internal rate of return on an investment that has an initial cost of $83,100 and projected cash inflows of $18,700, $38,600, $29,200, and $34,100 for Years 1 to 4, respectively? A. 10.55 percent B. 12.08 percent C. 15.58 percent D. 13.29 percent
Calculate the internal rate of return for an investment with the following characteristics in excel: Initial...
Calculate the internal rate of return for an investment with the following characteristics in excel: Initial Cost $450,000 Project Life 10 years MARR 15% Annual Revenue $75,000 Annual Cost $8,000 Please show excel equations
What would be the internal rate return on an investment with an initial cost of $226,485,...
What would be the internal rate return on an investment with an initial cost of $226,485, expected annual cash flows of $45,000 and expected annual income of $43,500 for the next 7 years? Group of answer choices 8% 12% 9% 10%
Discuss the steps an investor will use to evaluate a typical investment outlay, making a distinction...
Discuss the steps an investor will use to evaluate a typical investment outlay, making a distinction between net present value method and internal rate of return method. If the project’s internal rate of return is greater than the cost of capital, then the project is acceptable.
A company is evaluating an investment with an initial outlay of 200 000 SEK. The economic...
A company is evaluating an investment with an initial outlay of 200 000 SEK. The economic life of the investment is 5 years and the scrapping value after 5 years is expected to be zero. The investment is expected to generate a yearly cash-surplus of 80 000 SEK per year during year 1 to 5. The cost of capital for this investment type will be 10%. (a) The investment project Net Present Value is? (in thousands SEK) (b) The investment...
A potential investment requires an initial cash outlay of $675,000 and has a useful life of...
A potential investment requires an initial cash outlay of $675,000 and has a useful life of 10 years. Annual cash receipts from the investment are expected to be $185,000. The salvage value of the investment is expected to be $60,000. The company’s tax rate is 30%. The entire initial cash outlay (without any reduction for salvage value) will be depreciated over 10 years. Assume a discount rate of 21%. Show your Excel input and calculated net present value after-tax. (If...
 East Coast Television is considering a project with an initial outlay of​ $X (you will have...
 East Coast Television is considering a project with an initial outlay of​ $X (you will have to determine this​ amount). It is expected that the project will produce a positive cash flow of ​$43000 a year at the end of each year for the next 14 years. The appropriate discount rate for this project is 7 percent. If the project has an internal rate of return of 9 ​percent, what is the​ project's net present​ value? a.  If the project...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT