Using an interest rate of 10 per cent per year the net present value (NPV) of a
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Using an interest rate of 10 per cent per year the net present value (NPV) of a project has been correctly calculated as $50. If the interest rate is increased by 1 per cent the NPV of the project falls by $20, what is the internal rate of return (IRR) of the project?
(a) 7.5%
(b) 20.0%
(c) 11.7%
(d) 12.5%
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The correct answer is B Mathematically the IRR of a proj...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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