Iron Works International is considering a project that will

Iron Works International is considering a project that will produce annual cash flows of $38,200, $46,900, $57,600, and $23,100 over the next four years, respectively. What is the internal rate of return if the project has an initial cost of $112,800?

16.09%

16.60%

18.11%

17.35%

15.09%

Solution

Let irr be x%
At irr,present value of inflows=present value of outflows.

112800=38200/1.0x+46900/1.0x^2+57600/1.0x^3+23100/1.0x^4

Hence x=irr=18.11%(Approx).