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    Detailed Explanation to Internal Rate of return

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    A Corporation makes an investment of $14,400 that provides the following cash flow:

    Year Cash Flow
    1...........$7,000
    2.......... 7,000
    3.......... 4,000

    A. What is the net present value at an 11 percent discount rate?
    B. What is the internal rate of return? Use the interpolation procedure shown in this chapter.
    C. In this problem would you make the same decision under both parts a and b?

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    Solution Preview

    A Corporation makes an investment of $14,400 that provides the following cash flow:

    Year Cash Flow
    1...........$7,000
    2.......... 7,000
    3.......... 4,000

    A. What is the net present value at an 11 ...

    Solution Summary

    This explains the computation of internal rate of return.

    $2.19

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